Binary Options – Worthwhile Investment or Scam?

The quote below neatly sums up why you should avoid binary options:

These are gambling sites, pure and simple. It’s probably just a matter of time before regulators move in on them” Forbes Magazine)

So why are these sites gambling rather than investing the answer is simple there is a house edge created through the fixed payouts methods – lets define what they are:

A binary option is purchased on our platform, a contract is created that gives the buyer (known here as the investor) the right to buy an underlying asset at a fixed price, within a specified time frame with the broker BUT the option must be kept until maturity unlike a regular option it cannot be sold before expiry.

The House Edge Which Will See You Lose

The fact you have to wait until expiry creates an all or nothing bet and this quote neatly sums up the house edge:

This particular Web site pays $71 for each successful $100 “trade.” If you lose, you get back $15. Let’s say you make 1,000 “trades” and win 545 of them. Your profit is $38,695. But your 455 losses will cost you $38,675. In other words, you must win 54.5% of the time just to break even” (Forbes Magazine)

Binary options means you are trading with them where they have created an edge due to fixed payouts – sure you get limited risk but you get that when you bet on roulette but just as the casino has an edge in a game of roulette so does the binary options broker.

This form of dealing is not an investment and the broker creates an edge if you want limited risk without this edge just trade traditional options – there is no house edge, you can buy and sell the option whenever you want and you will have better regulatory protection.

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