When it comes to trading binary options, potential traders do not often know what they are committing to. Broker sites and many fake reviews are going to tell you that binaries are investments, financial trading and the way of earning $300 in a minute. Conservative traders will have a completely different opinion. They would, most probably, treat binary options are scam, gambling or just a funny way to trick people. In this article we are going to determine what binary options are and will discuss their nature in a detail.
Why binary options are gambling?
You have heard about gambling quite a lot. Today there are lots of ways to gamble your money away: breathtaking Vegas casinos, online slot machines or one of the options might be bitcoin casino gambling. The main idea behind gambling is that you may lose or you may win, but the results are not related to your actions. In other brokers, the luck determines your success.
In this sense, we cannot really say that binary options are gambling as you are able to choose the direction of the trade based on the analysis you perform. This is, of course, not applicable for binary options that expire within seconds or a few minutes. No analysis can determine the 5 trillion dollar market fluctuations for such a small period of time. If you trade binary options that expire in less than 3 hours, then binary trading is actually gambling.
Why binaries are not gambling?
You may often heard that binary options come with expected negative payout, and this makes them gambling. That’s not actually right. Binaries do come with negative expected payout, meaning that if you place two trades in the separate directions, you will end up with a guaranteed loss. Nevertheless, the same is applicable for generally anything: Forex trading, stock market, bitcoin gambling, futures, regular options etc.
With binaries you can usually get a return of 85%. This means that by getting both call and put option on the same instrument worth 100 USD each, you will actually lose 30 USD. With stocks you have spreads. When buying one share of Alphabet stock for 700 USD, you may expect to pay 20 USD in spreads or commissions. So if you sell it straight away, you will also end with a guaranteed loss. Hence, negative expected payouts do not make binaries gambling.
So what are they?
It is hard to say whether binaries are gambling or not. We would rather say that it depends on your attitude and the efforts you are willing to put into trading. Binaries are certainly a very risky trading instrument that are designed for pure speculation. They are definitely not an investment. Yet whether binary options are gambling or not can only be determined by you. If you are trading based on a careful analysis and have a clear overview on the market – binaries will rather be a simplified version of financial trading. If you mostly rely on your internal feeling or copy a strategy you found on the web – then binary options are gambling.
If the later is the case with you, you would be better off choosing a regular online betting or a modern version of it – bitcoin gambling.