February 9, 2016

What Are Binary Options?

I know only a little about stock options.   Generally you can buy an option to purchase or sell a stock at a future point.   I have had options at work granted to me by my employer.  They allowed me to buy my our company stock for a set value, say $20, and then if the stock went up I'd be making money.   So when I hear about Binary Options, I think this is some fancy way to invest in stocks.   Nope...

Read this article at Forbes : Don't Gamble On Binary Options

They do a good job explaining that binary options are really just a form of gambling.

Also be aware that they are often unregulated and read the warning from the SEC : Binary options and Fraud

So what are they?  In short :
You can make a bet that a stock will go up or down for a very short time period.  For example you buy a $100 option that it will go up.   5 minutes later if you are right you get $170.  If you are wrong you get $15.    Do that 1000 times spending $100 x 1000 or $100,000 and get it right 50% and you make $92,500 and you lose $7500.    The allure here I think is that people think they can make informed guesses about what a stock or commodity will do.   But you can't.

Avoid binary options.  Its just gambling and the odds are stacked against you.    Plus its unregulated and prone to fraud.


Blog Widget by LinkWithin