Home Understanding How Binary Options Work

Understanding How Binary Options Work

Binary options are considered safe investments by lots of investors. Unlike other volatile markets, binary options are financial alien options which offer payoffs in fixed monetary sums or nothing at all. The fact that your binary options broker makes money when you lose your trade makes it a very dubious investment.

Not withstanding, binary options trading is very popular. It is seen as an easier and more entertaining alternative to the trading of stocks and other financial assets. A few people liken the trade to gambling due to its rigged settings and abundance of scams.

Although opinions are split on Binary options, these views are completely subjective. People have differing experiences with binary options trading. Many have lost a lot of money; and some have made a fortune trading binary options. So, it is impossible to infer a conclusion from the competing views of people. The case for whether binary option is good or bad and safe or dangerous can only be presented in a merit-demerit argument. We have to do an in-depth analysis of binary options trading before we can give it a final verdict as to whether it is worth it or not.

How Does Binary Options Trading Work?

Binary options trading are investments that operate on a predictive structure. As far as predictions go, you’re never sure; you can either be wrong or right. A typical binary options trader bets on the value of a particular asset going above or below a fixed point within a set period of time. The duration of this period may vary with each trader; and can be as quick as one minute.

If the investor predicts correctly, he recoups all of his investment with a bonus as profit. But if the investor predicts wrongly, he loses all of his investment. So you see why some people may disapprove of this type of trading.

Is It Gambling Then?

Many experts and market analysts have compared binary option trading to the act of gambling. Binary options brokers, however, disagree vehemently. Their basis for this argument hinges strongly on the fact that not only are payments regulated by third parties, they, (the brokers) do not earn commission on bets that end in an impasse, i.e. a draw.

If you put the binary options brokers’ argument into consideration, it is still entirely subjective. The glaring fact that something which functions on the format of either making or losing money by making predictions makes binary options trading a chance game. But we may still further argue whether or not this gambling theory applies to stocks and financial asset trading.

Potential for Scams

The major concern of people involved in binary options trading is the high possibility of scams. It starts with the ‘third party’ binary options trading companies who fix their own price indicators. What this means is that these trading firms could influence numbers towards their favour. Manipulation of numbers may have been going on under the scenes in many binary options trading firms. In fact, the case for scams in the binary options trade only came to the limelight in 2017, when Banc de Binary was forced to pay an estimated $11m settlement and hence shut down. Ever since this scandal was unmasked, binary options trading has struggled to make impact as a reliable investment. One of the most trustworthy brokers who offer binary options is IQ Option. IQ Option has a long standing tradition when it comes to trading and is also regulated bu some of the top tier regulators which makes it a safe choice. If you want more information about IQ Option than you should read our review and trader insights here.

There are clearly too many pitfalls and loopholes associated with binary options investments. Although it operates on a game of chance, it still continues to be an investment that has its own worldwide appeal. Under the right settings and conditions, it could still be a worthy investment consideration. However, there is little to suggest a lengthy longevity for Binary Options trading.