Binary options websites present binary options trading as investing, but what is binary options? Is it investing? Or, is it a game of chance? Here’s what I found out . . .
First, a word of warning, there is an epidemic of unregistered binary options brokers online. These brokers do not play by the rules and will probably steal your money. If a broker promises you can make a lot of money they are unregistered. Most unregistered brokers hide behind websites that promise fast, easy money with their special software, which they give away for free. Don’t fall for it.
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A registered binary options broker can’t promise you anything. I do not recommend binary options as a money-making strategy, but if you want to trade binary options, go with NADEX. NADEX is a registered broker.
What is Binary Options .
A binary option is a wager that a specific asset will behave in a specific manner at a specific time. When you buy a binary option, you are wagering that the value of an asset, perhaps a stock, will increase or fall when expected. You do not own the asset or stock. You are merely betting it will behave as anticipated at a specific time.
The NADEX explains it like this:
Binary options are limited-risk contracts based on a simple yes/no question about the market’s price action, like this: “Will this market be above this price at 3 pm today?” If you say yes, you buy the binary. If you think no, you sell. If at 3 pm, you’re right, you get the full $100. If not, you get zero. (NADEX)
It’s a lot like placing a bet with your neighborhood bookie for dogs, horses or houseflies. When you bet on greyhounds or horses, you are wagering a specific dog or horse will win at a specific time.
Betting on houseflies is more of a drinking game, but the fundamentals still apply.
The point is, it’s very easy to lose money with binary options. Trading binary options on the internet is a dangerous game. Here’s what the US Commodity Futures Trading Commission has to say about binary options:
• Much of the binary options market operates through Internet-based trading platforms that may be engaging in illegal activity. (Commodities Futures Trading Commission)
All or Nothing.
While binary options websites present binary options trading as investing and often give away software to prove it. Binary options trading is not investing. It’s purely a game of chance.
Through binary options, you can place a bet on anything publicly traded.
Binary options, also known in the industry as “all-or-nothing-options,” “digital options,” or “FROs” aka “Fixed Return Options” can be purchased for stocks, commodities, indexes, foreign exchange, and nearly any financial derivative.
Binary options websites tend to specialize in asset classes. Some have a broad offering of choices, while others are more narrowly focused. Nearly all offer a free guide to buying binary options and many offer free trading software that they claim automates the trading process so you can get rich while you sleep.
Binary Options, a Subculture of Deceit.
Not surprisingly, the same people who enjoy playing online poker also enjoy binary options trading.
I suspect binary options trading permits habitual gamblers to indulge in their addiction while pretending to be respectable investors. The truth is, binary options trading websites are gambling sites.
Binary options websites present themselves as offering controlled risk and claim you can’t lose more than set amounts. They also stress the low cost of entry; the small amount wagered and the promise of big gains if you win.
Non-gamblers, people who are eagerly searching for ways to make money from home, are also drawn in because of how easy it appears to be to profit with binary options, and because they believe they can earn an impressive income with their laptop.
Binary Traders Anonymous.
Some people do make money with binary options, just as some people make money gambling. But for every example of a winner, we are not told how many times they lost. If we tallied their winnings with their losses, the outcome would show a substantial loss over time.
Like in Las Vegas, every game of chance favors the house. In the case of binary options, the broker wins consistently. Another winner in the binary options game is the affiliate who recruited the trader for the broker.
An affiliate is paid a commission for every trader they deliver to the broker.
Is it any wonder that affiliates give away guidebooks and software? They’ll do anything to get you to open an account, because, in the end, you are giving the broker your money.
Statistically, it is nearly impossible to predict both how an asset will perform AND when. There are too many variables. Getting it right is pure chance.
Over time, the odds are a binary trader will lose far more often than they win. Trading binary options is not investing.
The Last Word on Binary Options.
At best, trading binary options is a game of chance, and the odds are not in your favor. However, with unregistered brokers, the chances are extremely high you will lose all of your money.
Sites that promote binary options stand to earn a lot of money if they can get you to open an account. They will use every advertising and psychological trick in the book to get your money. Because the industry is unregulated, they can promise you the moon, but you’ll never get it.
Their promises of making millions are lies. Once you put money into the account of an unregistered broker, you can kiss it goodbye. It’s gone forever!
If you are researching binary options to make money online, the good news is you CAN make money on the internet. You just can’t do it with binary options.
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If you found this article helpful, please leave a comment below. Thank you!
Really an awesome article in binary options. I have heard about it but did not know anything in details. But today I have created a basic ideas from this post. Thanks for writing such an educative post.
Hey Gary. Nice post. I learned a lot, This binary trading looks risky to me. You are right to call them gambiling, because they are when you think about it. From what I gather, you can win twenty times and then make a mistake and loose it all, am I right?
Hi, Nikola!
I’m glad you found something useful in my post about Binary Options.
Back in the mid-1970s, I was fortunate to have good investment advice. I was taught value investing. This is the same strategy Warren Buffet uses. It is a solid investment strategy. At the time, I would have to go to the public library to research a company before buying stock. A lot has happened since then, most obviously the internet.
The internet and de-regulation of the financial sector has made it extremely dangerous to invest. Investing has become more like a computer game than investing. Day trading or short-term investing increases the risk exponentially.
Wise investing begins with living on a budget and establishing a robust reserve of cash for emergencies. After a cash reserve is established, then allocate a specific amount of discretionary income to long-term investments.
Binary options and Forex are not investments. They are gambling and speculation. Let the gamblers have their fun, but if you are serious about investing and keeping your gains, stay the heck away from them.
Thanks for stopping by,
Gary
Hi there Gary,
I totally agree with your analysis ofbinary options and teh comparison to them and gambling. But there is some element of calculated risk where money can be made. It is very much like poker – there are those that earn consistent money from that due to high skill factor but those few are exactly that – few and far between.
How does binary options trading compare to futires trading? is it the same thing?
Hi, Derek Marshall!
I’m sure you are right to compare binary options trading to poker. I’m not a poker player, but I took a memory training course from someone who used his keen memory to win at poker on a consistent basis. He said that by memorizing the cards he has about a 3% advantage over the house. That’s not much of an advantage, but with skill and extraordinary emotional control, he was able to do very well until the casinos found out. Now he’s not allowed to play poker in any casino in the US or Britain. But, I digress . . .
Back to binary options. The issue I have with binary options is that they are marketed as an easy way for people to make money online. This simply is not true and has caused untold thousands of people to lose their money.
There is a rule on the street about gambling, that is, “Never bet a man at his own game.” Trading in binary options is the broker’s game.
Unless someone is thoroughly familiar with binary options, has confidence, skill and extraordinary emotional control the only way they will win with binary options is with luck.
I will write about futures, well . . ., in the future.
Thanks for stopping by,
Gary
Thank you for publishing very informative article about binary options. When it comes to binary options trading, the odds are not in our favor. It is better to stay away of them. Like you said, rather we should focus on legit online program, jes, it takes time and commitment but in the end you actually make money.
Great article
Karlo
Hi, Karlo!
In the 1980s, I went through investment and securities training and held a Series 7 securities license to sell mutual funds. To my knowledge binary options had not been invented yet, but options were traded then.
Veteran investors warned us to stay away from options and told us that the purpose of options was to create a lot of losers so the big traders could make lots of money. I think binary options have made it even easier and faster for lots of people to lose money and easier and faster for the big boys to make lots of money.
Thanks for stopping by,
Gary
Thank you Gary for giving the real scoop on binary options. I see so many websites and people pushing this as investing. It is not investing as you say, it is really just a form of gambling. I particularly do not like to throw my money away, and see this as just that, throwing it away. So many look for ways to make quick money, and it is sad how many fall prey to sites like those peddling binary options.
Hi, Matt’s Mom!
Of course the reason we see so many websites pushing binary options is because it is very lucrative for the affiliate promoting it.
Apparently gamblers are flocking to binary options. They can get their gambling high and pretend they are actually legitimately investing. Gamblers will do what they do, but it is the non-gambler who might be taken in with the promises of fast, easy money, and that just isn’t the truth.
Thanks for stopping by,
Gary
Actually you can do great earnings with binary options. Your post is’t accurate this time.
Affiliate don’t get 500$ for each trader as you said. It depends on many factors.
Secondly there is something called money management in trading weather it was binary options of forex.
The real problem of binary options is getting greedy. As long as you are managing your initial investment you will make great profits.
I doubled my investment five times in a month by managing my balance well. That’s a fact against your claims.
Hi, Hahmood!
I appreciate your insight into Binary Options. I researched several Binary Options affiliate programs and the lowest commission was $200. The highest commissions were actually much higher than $500, but as you mentioned,it depends on many factors. The highest commissions paid out are based on how much the broker makes, which, in turn depends on how much the trader loses. This commission structure is very similar to the commission structure casino websites use to pay their affiliates.
It’s good to hear you made money with Binary Options and I hope your luck continues, but from what I’ve found in my research, over time, the trades favor the house.
In his Forbes article, “Don’t Gamble on Binary Options”, Gordan Pape writes:
“There are lots of ways to lose your money in this world but here’s one I hadn’t encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com. The sites appeal to the same type of people who play poker online. But they somehow have an aura of being more respectable because they represent themselves as offering a form of investing. Don’t kid yourself. These are gambling sites, pure and simple.”
Thanks for stopping by,
Gary