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 . . .
What is Binary Options?
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.
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.
Back to 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.
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.
Making money online is rather simple. It does take time, patience and commitment, but people from all walks of life make money online every day. Many earn six-figures and more.
I’m a member of a community of internet entrepreneurs who help people build successful online businesses. We offer a free basic training course that will get you started and we’ll help you every step of the way.
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