Binary options have been defined as limited risk financial contracts that are based on a simple market proposition. Essentially it is a yes or no question that one places a bet on. This means that one has a 50% chance of ‘winning’. How much one would make off of this bet would be determined by the terms that are set forth at the onset of the process.
Binary options have some basic characteristics that sets them apart from other financial instruments. First of all these options are generally not regulated. While many countries and localities are taking the steps to change this, binary options generally are not controlled by any laws or regulatory commissions.
The fact that they are not regulated means that there is a huge window that allows for fraud. Many investors have claimed that they have incurred great losses from buying these instruments. The problem is that these options are dealt with in much the same way that online betting is.
Thirdly, these instruments are not monitored by any 3rd party so there is no guarantee that the transactions will be entirely fair. This may be a problem for some investors, but many do not have issues with it. Overall, the fact that they are traded online makes them more of a gambling scenario than anything else.
Is Binary Trading Right For You?
This does not necessarily mean that binary options should never be considered. These are great instruments for the beginner in the market, as well as for those who love the thrill of gambling. Among the many positives associated with binary options includes the fixed terms as they are set at the beginning of the trades.
The fact that the odds of returns are fixed at the onset means that the amount lost is minimized as well. Binary option also offers the safety net of being a very low risk and very low cost to get in. Other positives include the fact that low to no collateral is required to trade options as well as the trading window is short term. It can range from a couple of minutes to a week, so payout is quick.
Some of the more popular instruments to ‘bet’ on with options includes indices, stocks, commodities and the FOREX. This means that the investor also has choices. Binary options may not be every investors choice, but they are an option that can be chosen from.
28 Aug 2015