Education

An Overview On Binary Options

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Binary options trading has made some headlines in 2017, and a lot of people who manage their own finances might be getting curious about them. While not exactly a mainstream form of investment, binary options inspire a lot of activity around the world, and are thus worth looking into for anyone handling a portfolio. However, don’t get too excited. Most of the aforementioned headlines in 2017 effectively make the case against binary options trading as a trustworthy or reliable means of investment.

So – what exactly are binary options? They’re actually fairly easy to explain. In a phrase, a binary option is an investment in which a trader makes a bet on the price movement of an underlying asset in the near future, for a fixed amount. Let’s say the asset is gold. Instead of buying a given quantity of gold and selling it at a future value, you would instead be betting whether or not gold will reach a given value at a given time. If your bet is correct, you collect a profit; if it’s not, you lose the amount of capital you invested in the first place. Other than learning some specific terminology, there’s really not much more to it than that.

Because of the way this practice works, binary options trading is often compared to gambling, and specifically sports betting. In fact, one article written about this comparison described the nature of sports betting before concluding that with binary options, it’s no different. This is pretty interesting given that experts often stress that ordinary stock trading is not like gambling. In this case, however, it’s easy to spot the similarities. You’re ultimately guessing whether or not a given outcome will occur, and putting money on your guess. And as with sports betting, binary options traders can do plenty of research to inform their decisions, while never having certainty about what will happen.

The problem, unfortunately, is that binary options trading is actually less reliable even than sports betting. When you wager on a sporting event at a reputable firm or casino, you can be assured that payouts will be honest and fair. You also know that the result of a sporting event will be undeniable public knowledge. With binary options, however, there is a concern that many of the top firms fudge price listings in order to manipulate trades in their own favor. That doesn’t mean every single trade is rigged, or that every trader will lose; but it does mean that most trades can be rigged, and in those cases it’s likely that the majority will lose.

Because of this and other concerns with scams, we’re starting to see some binary trading companies shutting down, just as this style of investment was starting to generate a little more attention worldwide. Earlier this year we saw Europe-based Banc de Binary shut down over concerns about illegitimate practices, and the firm isn’t alone. Do some research on similar companies, or even entire countries’ stances toward binary trading, and you’ll find plenty of articles about sanctions, penalties, and closings.

Unfortunately, that’s where we are today. Binary trading is an intriguing way to invest, and one that might appeal to a lot of people who would otherwise shy away from putting money into stocks. But as of now, the business just isn’t viewed as a particularly trustworthy one.

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