Binary Options Forums – Pros and Cons

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  • Binomo
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Introduction Guide to Binary Options – Pros, Cons and Examples

Binary options are a new and popular type of investment vehicle among traders mainly because of the simplicity. Similarly to vanilla options, binary options allow a trader to trade on the future price of an asset. For example, if an asset (stock, index, commodity, foreign currency pair) is trading at certain a price, a binary platform gives you the option to purchase a CALL or PUT option on whether you think the price will go up or down. This is very similar to vanilla options. The main difference between the two type of options is the expiration date. Most binary options timeframes are between 60 seconds to 5 . (full story)

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  • Post # 1
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  • Apr 20, 2020 7:17am Apr 20, 2020 7:17am
  • Post # 2
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  • Apr 20, 2020 7:44am Apr 20, 2020 7:44am
  • Post # 3
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  • Apr 20, 2020 8:32am Apr 20, 2020 8:32am

Agreed – you’ll never win. The odds are stacked so hard against you that it’s just a way to lose money. Also, you’ll never beat the brokers who have algos in place to make sure that any money you win they’ll eventually get back.

You click and your trade gets placed at precisely the right price to favour them, if you complain they say it’s Internet delays, market ‘conditions’ and a whole host of other excuses to not admit to ripping you off. Some of these delays are so blatant you wonder how they get away with it.

Then if you do try to make a withdrawal the real problems start. Upset them in ANY way and they’ll block you, forever. And try proving any of this in court – good luck with that.

Even FX brokers have ‘methods’ to keep you at bay so you have to tread carefully about who you sign up with.

Binary Options – just say no!

  • Post # 4
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  • Apr 20, 2020 9:03am Apr 20, 2020 9:03am
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  • Apr 20, 2020 9:24am Apr 20, 2020 9:24am

BO is the surest way to lose your shirt.

If you dare use small amount on credit card and get ready to take effort to get your funds back if you are lucky via the credit card dispute route.

  • Post # 6
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  • Apr 20, 2020 9:25am Apr 20, 2020 9:25am

the best people join the market makers. the good opens a fx brokerage shop, the worst run a binary options casino business.

it’s not even trading. purely a casino house.

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  • Apr 20, 2020 10:02am Apr 20, 2020 10:02am
  • Post # 8
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  • Apr 21, 2020 4:00am Apr 21, 2020 4:00am

Interesting comment. I also had a great news trading system that worked 80/90% of the time (too complicated to waste time explaining here), but as soon as they realised what I was up to, things started to ‘go wrong’. It’s subtle most of the time but eventually you find out that they’re screwing you.
So there you have it. a perfect system, only now I can’t trade it because no one will let me. Two years wasted before I finally gave up. You’ll never win long term with these people.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

As I’m in England I do Spread Betting now which is tax free here (no need to do FX if you’re in England) – the brokers are regulated but of course you still have to watch them like a hawk as you would any broker but generally they’re OK and at least they’re in the same country as you so they’re easier to deal with if there’s a problem which there hasn’t been so far.

My advice to any novice reading this is to keep well away from BOs.

Sadly, Spread Betting brokers don’t accept US/foreign traders so you’ll have to use a FX broker.

What are Binary Options?

Shanthi Rexaline
Contributor, Benzinga

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Derivative contracts were born because of people’s innate desire to circumvent uncertainty. A derivative contract is a contract drawn up between two parties, the price of which is derived based on an underlying asset.

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The widely-used derivatives include futures, options, swaps, and warrants. A futures contract provides for buying or selling an asset at a predetermined price at a future date, while an option contract allows the purchaser of the option the right to sell or buy a specific asset at a later date at an agreed-upon price.

Apart from the basic, plain vanilla put and call options, variants called exotic options are also available. An exotic option is a little more complex, with special features or pay-off structures intended to meet specific needs of investors.

One example of an exotic option is the binary option.

What are binary options?

Binary options, as the name implies, has two possible outcomes:

  1. The price of the underlying asset finishes either above or below the specified price at the specified time. It can be categorized as one of the simplest financial assets.
  2. Based on a “yes” or “no” proposition, it allows an individual to trade, although the risk, as well as profit potential, are capped.
Binary options basics

Evolution of binary trading options

Binary options became available for retail traders following SEC approval in 2008.

Previously, binary options trading existed but was available only to banks, institutional investors or high net-worth individuals through the over-the-counter market.

In 2007, when the subprime mortgage crisis began to rear its ugly head, the Options Clearing Corporation, or OCC, embarked upon the job of developing regulatory framework for the options market, while also proposing changes to upgrade binary options to the status of a financial asset that could trade as a standalone instrument in major exchanges.

Following SEC approval, the Chicago Board Options Exchange (CBOE) and the American Stock Exchange offered binary options to retail traders. In its early days, binary options came with a lot of restrictions such as the availability of merely call options and options on the S&P 500 Index.

Slowly and steadily, the popularity of binary options increased amid the broadening of the variety of binary options available for trading and the improvement in the trading software that now allows online and mobile app trading.

Types of binary options

  • High/low option (above/below option): This is the most popular type of binary option. An investor bets on the underlying asset going above or below the predetermined price at the time of expiration.
  • Touch option: An asset will touch the strike price at the time of expiration.
  • Range option : The asset is in a predetermined range by the time of expiration.
  • 60 seconds option: As the name suggests, the 60 seconds option expires in 60 seconds from the time of purchase. A trader in the 60 seconds option should be quick and adequately backed up by a trading software with a best-in-class charting program.

Cash-or-nothing vs. asset-or-nothing

There are two forms of options: cash-or-nothing and asset-or-nothing.

A cash-or-nothing option pays a trader a fixed amount of money or nothing at all, while an asset-or-nothing options also has a fixed payoff but the payoff is equal to the price of the asset.

Other terms

  • Underlying asset: The asset on which the binary option is based upon, or a security used in the binary options contract.
  • Call: An option contract drawn up by a trader who believes the price of the underlying asset will increase by the time the option expires.
  • Put: An option purchased by a trader who believes the price of the underlying security will drop by the time the option expires.
  • Strike price: The price of an underlying asset at the time of the purchase of the binary option, compared against the price of the asset at the time of the expiry of the option.
  • In-the-money, or ITM: An option is in-the-money if a call option’s strike price is below the market price of the underlying asset, or if the strike price of a put option is above the market price of the underlying asset.
  • Out-of-the-money, or OTM: When the strike price of a call option is above the market price of the underlying asset or when the strike price of a put option below the market price of the underlying asset, then the option is out-of-the-money.

Breadth of underlying assets

Binary options provide for trading a host of underlying assets, some of which are:

Binary options example

Assume the bid and ask price of a binary options contract for the EUR-USD currency pair at greater than $1.415 are $30 and $34, respectively. A trader who believes the pair will close above the $1.415 level at 4 p.m. ET, will buy the call option at $34.

Since the option can increase in value to $100 or drop to $0 depending on how the EUR-USD pair moves, a traders makes a profit of $66 (if the pair trades above $1.415 at the specified time) or incurs a loss of $30 (if the pair trades below) $1.415 at the specified time.

Sample binary options trade

The price of the binary option is determined by the market, based on the likelihood of the proposition implied by the contract coming true. If the odds are less, the option price will be low (say $10 or $15).

If you invest $100 in a call option in the S&P 500 Index, which is currently trading at 2,875 (strike price), with an expiration time of 30 minutes, you stand to gain $100, plus a payout (if specified in the contract) if the index is above 2,875 at the expiration time.

The expiration time can be the last traded price or the average of the bid and ask price, depending on the terms set by the broker.

However, if your binary option expires out of the money, or the index is trading below the strike price, you stand to lose your $100.

If the market price is exactly at the strike price at the time of expiration, then you preserve your investment, without any profit.

Advantages to binary options trading

  • You’ll know both the risk and reward in advance, or at the time a contract is struck
  • Binary options expire quickly and can generate substantial returns with a few quick, successful trades. Expiry period could range from 15 minutes to up to a week or two.
  • Investments could be as little as $10.
  • Binary options provide an opportunity to trade with a wide range of assets available all over the world.

Disadvantages of binary options trading

  • Since some of the binary options brokers are loosely regulated, you might face the risk of losing your money if your broker opts to hoodwink you.
  • Since binary options trading is more of a speculative activity, despite the research and analysis going into it, the outcome of the investment is not always a certainty.
  • Earnings potential is limited relative to the movement in the underlying asset. Despite whether an underlying instrument moves $1 or $100 in the desired direction, your return is limited to the price of the binary option.

Brokers that allow binary options

You’ll find that a lot of brokers allow for binary options trading. However, some of them aren’t trustworthy or fall far below the threshold for acceptable brokerages. You can read more about this in our Best Binary Options Brokers guide.

Final thoughts

Since binary options trading comes with its own set of pros and cons, you’ll have to determine if it’s the right way to go for you. After all, limited regulations and limited profit potential can render it an unattractive option. However, there’s no denying of the fact that binary options are an excellent practice ground for a beginner who wants to take the plunge.

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Binary Options Forums – Pros and Cons

Anyone interested in learning how to trade has been told the best first step is paper trading. In today’s electronic world, “paper trading” means tapping into many demo programs available that don’t use real money but can help you learn the market ebbs and flows and trade using various technical tools. Another method to learn how to trade, especially forex, is to use binary options. These are an increasingly popular type of global trading tool. In fact, Google Trends data indicates that the search term “binary options” has risen parabolically in the past two years, and now has exceeded the frequency of the search term “forex trading.”

Along with this increase in interest is the Internet growth of white-label platforms offered for binary options. This isn’t surprising because binary options have many positives, one being the ability to put on a trade for a simple “yes” or “no” on whether a market will be up or down within an expiration time that can be between five and 30 minutes. Also, many trades can return more than 70%. No doubt, this kind of trading is extremely attractive. From a technical perspective these are at-the-money options with very short-term expirations. But from a risk management point of view, binary options require a win/loss ratio of 6-out-of-10 trades to break even.

Binary options come in many different flavors, such as “one–touch” options where a trader can anticipate that the price will touch a level. There also are range options, where a trader can take a position on whether the price will stay within a specific range. On some platforms, traders can select their own target strike prices. There are also 60-second expiration options. These are the most difficult to end up in-the-money because the price behavior in these durations is very volatile. Many firms offer binary options that basically are set, which lock in a position until expiration, although some firms allow closing the position before expiration. Yes, binary options are exciting, offering within minutes the result of a win or loss.

But with any high-growth market comes challenges. For example, choosing the right broker or platform is key. As with any new instrument and industry, binary options have a “wild west” aspect. Many firms that offer these platforms are licensed offshore and fall outside the stricter regulatory umbrella and standards that are common in the United States, Europe and Australia. As a result, some firms use questionable marketing tactics designed to lure customers with give-aways, such as iPhones and flat-screen TVs. The reality is most customers lose their money, and lose it quickly with these schemes.

Also common are “bonus” programs that match a customer’s deposit, but essentially prevent the customer from withdrawing money until 10-20 times the volume of the deposit is generated. Naïve customers respond to the opportunity to trade the firm’s money, not realizing that they are trapping themselves into financial oblivion. For example, if a trader places $10,000 and gets a $10,000 match in one firm, they have to generate $200,000 in trading turnover or volume before they can withdraw their capital. The result is a very low statistical probability of ever getting any money back. Therefore, unless you have a proven track record, never enter a “bonus” agreement.

Finally, like age-old boiler rooms, some of these unregulated or offshore-regulated firms use deceptive practices in which their brokers use aliases. Adding insult to injury, brokers in these firms have little experience in trading the markets. They are at the core sales people who try to use the right buzz words to feign expertise. These brokers give out what are essentially whim-based trade alerts that primarily encourage trading and not profits.

These warnings aside, trading binary options is a low cost way to trade and learn a market. Trading these products also provides a great opportunity to hone trading skills. It especially strengthens the understanding of fundamentals because the key to success is detecting the right direction. Binary options definitely are a great place for a new trader to begin to understand the forex market. For example, the North American Derivatives Exchange (Nadex) offers free demo accounts that you can use to get a feel of the market and familiarize yourself with various tools to keep up with it. The exchange also is regulated by the Commodity Futures Trading Commission and offers several currency pairs, including the EUR/USD, USD/JDP and USD/CAD on its platform. Further, you can trade directly with Nadex and not go through a broker. A great appeal of binary options lies in their amenability to the use of classic trend lines, resistance and support levels, candlestick charts and analysis of price patterns to find trading signals. Binaries are a craze now, but can evolve into a tool that can be used in a variety of ways to help all traders hone their craft.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

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