As you've all heard through my monthly income streams report, I'm always looking for another way to make money, and create another stream of income. Recently, I came upon the concept of investing in Binary Options, and have been doing a lot of research along the way.
What are Binary Options?
Binary Options is a trading market that is based on short terms trades. Ranging anywhere from 5 to 30 minutes. If you position (positive – call or negative-put) is correct then your option trade will profit. A lot of times these options will profit you anywhere from 50-170% depending on the asset in a very short period of time.
Binary options trade stocks, commodities, indices, and currencies under short term trades. Take for instance, let's say that you think the Euro currency will finish above $1.124 at 12:30 pm . It is currently 12 pm and your option has 30 minutes before it is scheduled to complete. If your option (in this case a call) finished above $1.124 after 12:30 pm then your option will payout. If not, then you will lose your entire initial investment. At the other end of that position, another investor bought your call and thought it would finish below that $1.124 price point, and he or she will profit from that option. For every trade there is an opposite trade where another investor thinks the opposite will be true.
Now take the opposite view. If you think the Euro currency is going to go down, then you'd buy a “put option” where if the Euro finishes below that price point, then you'd profit. Again the same is true in our previous example that someone else is buying the opposite bet.
Binary options offer quick trades with a big payback. In a lot of situations, with binary options, trends and trends analysis can be used to show where the trade is trending towards. Obviously, most people have access to this same data, so if the trend is generally “up”, then the call options will come at a premium, because most people are betting that the trade trend will continue. On the opposite end of that trade, there are very few buyers that would bet against that trend.
From a lot of research I've done a lot of binary options trades come with very low minimums (around $100-500) to start. If you are looking for another source of income and are into analyzing charts and trends, then binary options might be an option for you to create another source of income.
Binary options is very similar to gambling. It can be highly additive and a lot of your options can lose money very quickly. It shouldn't be thought of as something that you can just walk into with little to no knowledge and expect to make money.
Trends do reverse – as I was mentioning in the benefits, you can gather a good idea of where the trade is heading. However, past performance does not indicate future probability. Duh! As in any investment, trends do reverse, and if you are caught on the opposite end of the trade, then you can lose all or the majority of your trades if the markets take a quick reversal. With how volatile the markets have been, then this can be a quick way to lose a lot of money. The key is to make a lot of smaller trades across a lot of different options. This is the concept of not putting all your eggs in one basket. Realize you will either profit or lose all of your investment!
Binary options are generally unregulated and prone to fraud. The SEC and CTFC have both issued warnings against unregulated binary option sites and the risks that are involved in trading on these exchanges.
Like with any highly risky investment I caution you all to tread carefully when pulling the trigger to buy binary options. You can quickly become sucked into these quick trades (like a casino machine), and the attraction to making quick big profits can lure you aware from making good sound small investments.
The preceding post was brought to you by Banc De Binary. All opinions expressed are our own.