Binary Options what they “forget” to tell you
What is Binary Options? Binary Options are options like any other options, but the difference is your chance or risk to make or lose 70% on your investment. we are talking about a very dangerous method of investment. the option can in percentages cause you significant losses. you must understand, when you invest in stocks you may lose the entire investment. but that is a very rare situation, and a good stock has a very small volatility when compared with Binary Options.
Binary Options allow you to win or lose if the underline asset (stock) reaches a rate that is stated in the option. unlike a regular option that allow the trader for 3 months (usually) or so to back down from the loss. with the binary kind, the time frame is much shorter. meaning whatever you do there is no time to fix it. as a result, whatever you “bet” is final.
Here is an example: apple inc stock at 1,000. you buy an option at a price of 1,010 and if the option expires at 18:00 for 1,015 you win 70%. if on the other hand, the stock price at six o’clock is 1,005 you lose 85%. it doesn’t matter what is apple price. the only thing that matters is the direction of the underline asset.
On the internet, you will find all sort of Binary Options operators. Each operator of binary options through the website runs various options. the different properties, different time horizons, with gains and losses in various potentials. but the methodology of binary options investment direction is Simple it’s all or nothing.
Very important to understand about Binary Options:
It is important to stress out about options. even if you consider technical analysis, trend analysis of securities, statistical evaluation and so on. we are dealing with speculation. what do you really believe will happen to a particular stock? the time element makes this speculation.
The website is managing the bet the same way a casino manage the bet. The website charge high commission expressed in the difference between what you get if you win versus what pay if you lose. The website broker always wins.
The players chance to win is simply not existent. or, in reality, negative. let’s take a statistical example. flipping a coin, your chances are 50% to win or lose. now if the managing website offers you if you win you get 100 AUD and if you lose you need to pay 120AUD. you see your sum is a loss in statistical measures. and this is how they work.
Now you want to bet? be sure you understand that if it looks like a casino and sound like a casino, it is a casino. this is why they need to promise you almost the same thing Jesus promised his disciples fame and fortune. but you must understand one thing, a casino is a place you are going to have a good time losing your money. why? because the house has the big odds, you, on the other hand, have not.
The best description I can use to picture you the real situation is these websites do is like taking you to the middle of the ocean and leave you there. now how good can you swim by yourself?
Where to begin with regards to Binary Options:
If you decided to give it a go, here is how. first you don’t need much money. most brokers will allow you to start with as little as $250. the reason for that is an addiction, just like gambling.
The next step is to find a company that specializes in trading binary options. the registration is straightforward, all you need is a credit card. after that, you need to transfer the funds to your trading account. and there you good to go.
One small thing to remember. there is a TAX involved in gains from the stock exchange. so you must make sure you get all the relevant information from your very reliable broker.
The major rule in finance is that there is a correlation between risk and return. the bigger the risk the bigger the return. this kind of option has a very big risk built in within them. this is why you can win big fast, and, of course, lose big fast. the rule of thumb, bet small amounts first to understand how the system works. the broker will give you so many different ways to bet, most of them has a very big risk attached to them. so you got to be smart and take your time, whoever tells you that you are going to be a millionaire fast is lying. only in fairytales, people get rich fast.
The main thing to remember is that all you need to predict is the direction of the change, not the change itself. but that in reality, is easier said than done. actually, no one knows in a matter of a day the direction of a stock or any other asset for that matter.
Another key for your success is to understand who you face up against. you see options are sum zero games. what you win someone else loses and vice verse. by the way, this is why the professionals need you. or your money. when you go and bet on something you know nothing about, there is a strong evidence that you will pay “learning fees”, and sometimes they can be very costly. as I see it, this is the number one reason to not try at all. If anyone knew how to predict the marketplace, not only that they didn’t need you. they would have owned half the world by now. thanks to compound interest.
Cons and pros of Binary Options:
The main advantage is the fact that the outcome is known very fast.
Another advantage is the fact that you can exercise the option before it expires. when the market is very volatile, the underline asset can go up and down a few times a day. if you are able to exercise your option when you are winning than do so. it’s all a push of a button.
Another advantage is the fact that you can start small. the reason for that lies within the commission of the broker. he gets paid for every bet no matter the size of it.
The major advantage is its big disadvantage as well. you can win very big. but you can lose very big, and often this is what happens to most investors, or should I say, speculators.
Another disadvantage is the fact that the total of your expectancy is negative because the house wins anyway.
A major disadvantage is the fact that like in the casino, it’s addictive. your blood rush every time you win, and it pulls you deeper and deeper up till the point that you think you can’t lose, only to see you bankrupt against the odds.
For conclusion Binary Options the final verdict:
Binary Options is very dangerous and you are more likely to lose than to win. but if you specialize in the field, understand and apply technical analysis, conduct trend analysis on a daily basis. then you may have a chance to reduce the risk factor in your favor. but even then your starting point may shift your position back to a losing one. so whatever you do make sure you start very small and don’t get carry away from small wins.