Binary options trading has been making some headlines in 2017 and has become a curious subject for a lot of people. Even if you’re fairly financially literate and consider yourself to be a savvy investor, you may not be entirely familiar with what binary options are all about—or why they seem to be particularly controversial. For that reason, we’re using this space to put together an outline of the important points regarding this type of financial maneuver.
What Is Binary Options Trading?
It only takes a moment to get a handle on what makes binary options different from ordinary investments. The option refers to security, which can be a stock, commodity, or other sources for investment. But rather than buying a quantity of that security, you make a prediction based on the “strike price” instead, which is a predetermined price limit. If you “call” the security, you’re putting money on the idea that it will come out at or ahead of the strike price at a given time. If you “put” the security, you’re betting the under. An incorrect decision means you lose whatever money you put on the trade, while a correct one nets you a profit.
Is It Gambling?
This is something of a judgment call, but there are clearly some similarities. As with sports betting, you’re making a prediction of an outcome and hoping to profit from it. It can be an informed decision if you take the time to research the security and the surrounding circumstances, as you would with any other type of investment. But that’s not necessarily different than researching a sports team or competition to educate yourself regarding the likeliest outcomes. One argument against the idea that binary options trading is gambling is that gambling is regulated and subject to government authorities, whereas binary options firms tend to operate on their own. Thus, the argument isn’t that it’s safer than gambling, but that it’s even riskier.
Is It Rigged?
Given that point regarding gambling, the question becomes whether binary options trading is a rigged system. Many would say yes, and it’s because of the lack of regulation. Somewhat shockingly, some binary options trading platforms have been showing to make up their own outcomes, so as to guarantee that traders lose. That doesn’t mean everyone loses, but it does mean that firms find ways to ensure that the majority of traders lose. This can lead you to the conclusion that making counterintuitive bets in binary options trading could earn you money, and it could. Overall this is still a risky sort of trading based on luck and a frequently rigged system.
Will It Disappear?
It just may. Especially in the last year, we’ve started to see binary options trading firms receiving warnings, or even being forced to shut down. We’re also seeing awareness spreading regarding the scam-like nature of a lot of these businesses, to the point that there are now lists of platforms that shouldn’t be trusted. Right now binary options trading appears to be on its way to being totally outlawed, at least in much of the world, but it’s not entirely gone just yet.