What Are Binary Options
Binary options are relative in finance. There are two primary options either the return is a fixed return or some sort of asset or it is nothing at all. They are also referred to as all or nothing options. They are actual much more complex than simple all or nothing type deals but the binary options basics are a simple all or nothing explanation.
Buying binary options the risk is known at the beginning of the deal. In other words as a buyer you will know what specifically you will gain or not gain at the end of the term. An easier way to understand this model is to think of it in this simplified example:
You decide to buy stock of company XYZ at a binary cash or nothing option when the stock is at $50 with $1000 return. If at the end of the term the stock breaks through the $50 dollar threshold and is selling at $75 you get back $1000 if it is trading below or at the $50 dollar threshold you get nothing.
Controversy Over the Respect For Binary Options
This option has long been held as a controversial topic in finance circles beginning in 2008 new online platforms have cropped up under a lot of heat because conservative traders complain that binary options are not really investing but are more akin to gambling.
Since the online platforms have cropped up there are only about 90 of these platforms. The legal questions that swirl around this brand of trading has been quelled some since the SEC began allowing or more honestly recognizing all or nothing cash trades. The AMEX followed right on the heels of the SEC allowing European all or nothing trading.
Chicago Board Options Exchange shortly thereafter jumped on the band wagon as well. Although still considered not exactly a main stream way of trading it is largely accepted as an option in the largest markets. It is a relatively easy way to make a great return on your investment in a short period of time but of course any method that will bring you the most financial glory can back fire and bring you an equal amount of pain.
Is It For You?
If you are a new investor just getting their feet wet before you make any all or nothing deals speak to a financial adviser that can provide you with some direction. You also should always consider the risk and do as much research as you can handle on your own.
There is always risk no matter which model you follow, controlling the risk to the best of your ability is the goal. Ask someone that can provide you with direction and give you a better idea of what you stand to lose or gain.
Your best tool is your ability to research and ask questions when you are investing. There are plenty of people that have used this option to their advantage and there is plenty of information that is available that can help you to decide if this option is for you.