A fair bit of spotlight/scrutiny has been placed on binary options in the past years, with warnings issued from central banks such as the MAS (MAS-Cautions-Investors-on-Risks-in-Trading-Binary-Options-with-Unregulated-Platforms, SEC warns against Binary Options and scams such as the-wolves-of-tel-aviv-israels-exposed.
Likewise, we hope to take this chance to educate investors on this highly risky investment product and advise everyone to think twice before hopping on this bandwagon.
What are Binary Options?
For those who might have chanced upon a Binary trading advert or some sort of get rich scheme, you might be familiar with the below:
Trading with Binary options is to predict whether a stock, or an index, or a commodity or a forex pair, would go up or down within a certain time frame.
Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time?
Correct, you are NOT actually buying anything, you don't wait for something to go up and sell at a profit, not at all. You invest in putting down an option that, for example OIL, will have increased in price by the time your option expires, or the other way around, that it will close lower.
If you are right, you will make a profit of 65-90% on your invested amount.
These option time frames can be as little as 30 seconds, to 2 minutes, to 15 minutes, to 1 hour, .... It all depends on what you chose.
Is it a scam?
Short answer is yes & no.
In fact, it is not a scam when u consider that Binary options are in fact about as legitimate as your roulette wheel or soccer betting. Also, Binary options are simple to digest and much easier to peddle as a "transparent trading instrument", thus attributing to its popularity.
However, very often, you end up taking the other side of the market as your broker, i.e. If you win, the broker loses and vice versa. This creates a skewed conflict of interest and their ability to adjust the payout ratio (Odds/multiplier) amplifies that.
The Scam
The scam comes in when certain brokers get greedier and you start seeing instances like refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades.
Do not trade Binary Options.
Long story short, you have no business dabbling with binary options. You run the risk of dealing with an illegitimate broker and even if you manage to find a proper broker, you end up facing insurmountable house odds with negative expected value.
If the gambling bug bites, you might just be better off playing the lower house edge games in the casino like baccarat or blackjack.
In conclusion, there is no quick and easy money to be earned. Instead, do your homework and read.
Good luck.
Comments ( 51 )
Didn't read the whole post, only the conclusion.
I've sold structured products that had a binary content to them. Some large funds trade them. It's an investment with associated risks like any other. Sure some people might try to rip your eyeballs out in the retail market but otherwise all good..
Futures and Options are the same thing, just betting on movement (but by definition, you have the right to delivery/right to 100 shares yadda yadda) but we all know no one actually does that. Just a nice way around the definition of gambling.
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P&D, I would respectfully disagree that options trading is nothing more than structured gambling, if that is your position.
I've been an active options trader for many years, but even though I have a level 4 options trading clearance w/my brokerage account, IRAs allow for only level 1 (2 at some institutions). Level 1 meaning I can buy/sell calls/puts. Period. Level 4 allows me the ability to trade calls, puts, spreads, straddles, strangles, condors and a few other strategies. However, I keep my strategies pretty simple, keep my timeframes to weeklys or monthlys, and I use my strategies to get into a position at a cost below the CMV (by collecting premium to lower my cost basis if I'm getting assigned shares by selling puts), or by liquidating a position for above CMV by collecting premium by selling calls). Also, I like to sell straddles around earnings season, when I anticipate increased volatility. I don't like LEAPS simply b/c it ties up my excess capital for too long.
Trading options isn't for everyone, but they are a valuable, powerful tool when used properly. On the flip side, they can be monetary weapons of mass destruction when used improperly. The OCC (Options Clearinghouse Corp) is an excellent resource for those who want to trade options to start out. They used to have mock accounts that would allow people to practice w/o using real money. Don't know if they still allow for that, but I found some valuable tools on the site that I hadn't found in a number of books I've read on the topic.
Long-winded post I know. I'm pretty passionate about the practice, though. I have not come out on the winning side of every options trade, but all-in-all, I've done quite nicely, often times picking up anywhere from $300 - $2300 in a week without actually liquidating a single share in my portfolios.
I started out with options, I lost some doing stupid stuff with SPX weeklies (that's not why I said what I said in my post above) but made all of it back and then some by simply doing directional vertical spreads. Keeps the theta low, low cost upfront, and if you have a measured move you can adjust your strike legs accordingly and up your RR ratio. Some strats are really cool and can even do for income (ie covered calls)! I actually don't hate options, I just found I was doing great with directional plays so just went with futures. No theta decay, no expiration. I didn't need to wait at expiration for my max profit. The money you can make in a 20 point day in /ES is vastly different than a 20 point out spread on SPX, very wide in terms of profit.
Just by reading that you keep your time frame to weekly and monthly already shows you know what you're doing 100% (doesn't mean a lot coming from me lol). Unfortunately this isn't the case for 95% of traders. Most do options for the massive leverage, and doubt they even care about the whole "right to 100 shares @ a specific strike @ a specific date," or any of the strategies that you have mentioned. There was a report I read, most option-traders blow up because they buy super low expy options, they are just betting on the direction in such a short time frame, similar to binary options. In other words, they get stuck on the level 1 approval, lol.
That's awesome to hear, I seen your other posts, and I always love speaking to those who have been in the trading game for a while. I've only been in the game for around a year now, and I love it. Still very young but can't wait to see if I can emulate what I've learn and applied to a much larger account size. I personally believe that the market is simple, and the people who win are those who don't overcomplicate it.
EDIT: I generally believe selling premium is kind-of-meh at times. I mean, you're risking like 3:1 or sometimes 5:1 for a higher probability of profit. 5-10 wins can get wiped out in 1 loss sometimes. BUT, whatever works works. Making money in the end is all that matters. the positive expectancy is all that matters.
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Why does this website even allow binary options post? These are not real trading instruments on established exchanges but rip off sites.
I would agree trader, binaries are not really trading option, even though the call them binary options. Just a clever game of word-play to attempt to add some credence to a sham of an investment scheme.
I took a quick look at them when they popped up here. Aren't they basically the equivalent of gambling prop bets?
But they have nothing to do with finance
I lost money to binary option scam
How to Trade Binary Options ( Originally Posted: 10/16/2012 )
I came across new investment option that is binary trading system. can anybody member post some details of this trading system. ????
http://www.wallstreetoasis.com/forums/binary-options
my instinct tells me.... don't.
You can find out about binary options and providers at chiefbinaryoptions. com/en/option-web-review. Moreover, this broker provides demo account for practising, so you can try trading and understand the main features.
Binary Options have been around quite a long time now, typically become a great hit among the new traders. To get started, its important to explore the site like verifyproducts that covers all strategies and fundamental of binary options trading. Then you need to open free demo account on any platform and then practice the strategies to gain profit with real money.
this is a very fast way to lose alot of money - if you want to trade try spot FX, binary options is basically coin flipping your payoff is all or nothing
Choosing the right broker for binary options trading ( Originally Posted: 04/15/2013 )
Which points should take in mind while choosing broker?
Selecting the right broker for your trading a trader can consider Some of these factors are: Regulations Company Capitalization Trading Platforms Broker Types Customer Services
you don't trade binary options unless you want to lose money
You can find more information about binary options from this cool forex newswebsite called 7binaryoptions.
Troll/baiting thread. Needs to be deleted.
Yup 10000%
I can suggest you to check out binary brokers reviews (chiefbinaryoptions. com/en/best-binary-options-brokers), to decide which one is the best for you. To read about its regulation, assets index, services, popularity.
Do enough research and recommendations. I got scammed by a broker not long ago, I had to hire a refund professional to get my funds back.
all about binary options ( Originally Posted: 03/16/2013 )
On a day like today i would think making money using Binary Options would be very easy..just keep adding to your position as the index falls away....though i think trading opens at 11 am so the big fall/move of the day would be missed.
lol wtf binaries are fun
How could this be.. a post? Maybe only overqualified (or overthinking analysts) could think about binary options. Real traders don't even think about that piece of a joke.
JFC can we delete this abortion of a thread
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