Binary Options

A binary option is defined as an option with a fixed payout in which traders can predict the outcome from two possible results.

If the trader’s prediction is correct, they will receive an agreed upon payout. If not, the trader loses their initial stake.

These instruments are known as 'binary' given there can be only two outcomes – win or loss.

Binary options trading can be flexible given its simplified 'yes or no' proposition.

These options offer exposure into a wide range of markets, including forex, stock prices, commodities, and others.

Binary options also can deal with trading in both the short- and long-term, ranging from mere seconds to a calendar year.

Risks of Binary Options Trading

Binary options trading has largely been curtailed in Europe and the United States due to regulations.

This is due to several stigmas and episodes of abuse and fraud by unregulated binary options providers.

The combination of rapid investments with little or no experience resulted in large losses for many traders.

This was a central reason for many currently existing regulations that were installed.

Binary options can be used in theoretical asset pricing, however are particularly vulnerable to fraud in their applications.

In many jurisdictions, this is justified as a form of gambling, made worse by the fact many binary option providers have been exposed as fraudulent.

The industry was dealt a harsh blow in 2018 with the banning of all binary options advertising on Facebook.

Binary options providers have since moved beyond Europe to other less regulated jurisdictions.

Any such offerings should be approached with caution as investors are prone to losing money and at risk of dealing with possibly shady providers.