High Risk Investing: Binary Options

High Risk, High Reward?

In the world of high finance investing, two words strike fear into day traders and floor trader alike. Binary Options. Lets talk a little about what a standard option is before testing the waters of binary instruments.

A standard options is defined the following way:

A financial option is an established contract with two parties involved in the buying or selling of an asset at a specific price. The buyer has the right, but not the obligation to engage in a transaction if requested by the buyer. The seller has the obligation to fulfill the transaction if requested by the buyer. Standard long and short options are called calls and puts respectively.

The Binary

The Binary option is a higher risk instrument that has a fixed payoff at expiration if in the money. If out of the money at expiration, the option is worthless. Another aspect of the binary option is that there are several more strike prices hourly and sometimes more often. If you are a gambler, this is what make the chops worth licking. Because binary options expire multiple times daily, the opportunity for gains is much greater than a standard option. Standard options expire once a month. Conventional wisdom should be speaking to you right now saying "Because binary options expire multiple times daily, the opportunity to lose is greater as well." You are quite right in saying that. In fact, much like Las Vegas blackjack tables, binary option platforms have the house slightly stacked in their favor. Ever so slightly.

Platforms

Many of the trading platforms for binary options are located off-shore, with most headquartered in Greece. Global Options is one leading platform. There are several others including eztrader, spotoption, tradersroom, choicetrade, and optionbit. At the moment, online trading is the only trading platform. Assisted trades are available, but it isn't the same as calling your broker to sell 100 shares of Apple.

Worth the high risk?

Considering historical market fluctuations, the binary option can be a useful tool when your investment strategy speculates a big move up or down normally in one day. Either way, you would need to be able to predict fluctuation every bit as well as the pro's to profit with a heavily weighted binary option portfolio. If fact, you couldn't even refer to a binary option as a portfolio because funds are in and out in quarter hours. Risky? Yes. Worth it? It's always up to the individual investor to decide. Try utilizing once per month and track success to start. Analyze and repeat if necessary or if you have a hot tip. Shall we mention that this isn't something to suggest to Mom and Dad as a pension buffer? Binary options are the Porsche of investing. Pretty to look at, but as soon as you see it, it's gone. If your high risk investing brings you to the binary option, good luck to you.

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fibo777 profile image

fibo777 5 years ago

Thanks for sharing information on binary options. I prefer metals and currencies. Most investments that are potentially profitable are also quite risky. Maybe precious metals are an exception.

Useful hub!


nathandanials profile image

nathandanials 5 years ago from Golden Valley, MN Author

I like currency trades also, but I'm a long and can't decide which currency will actually appreciate right now.

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