Are Binary Options a good way to invest ?

binary option

No. Binary options should never be thought of as an investment. They are a way to speculate on the markets.

There are a number of reasons why they should never be seen as investments:

  • They can not be held long term.
  • They can not be sold once you bought them.
  • They are associated with very high risk.

If you want to try trading binary options you are free to do so and you might end up earning a lot of money. But you should be aware of the risks, you should never se them as investments and you should never put more than a couple percent of your money into binary options.

What are binary options?

A binary option is a way to bet money on whether a certain financial instrument is going to go up or down in value. Your goal is to try to predict in what direction the value of the underlying financial instrument will move before the option matures

If you get it right you can make a big profit. If you get it wrong you loose the entire purchase price of the binary option. A binary option will in other words always give you one of two possible outcomes. You win big or you loose your entire investment. This is why they are called binary options. They are also known as “all or nothing options” and “digital options”.

High Risk

You always risk loosing all the money you invested when you buy a binary option.

High Rewards

Binary Options can give you very high returns. It is common that a binary option will give you a return of more than 80% on your investment if it matures in the money. Some more exotic types of binary options can give you a return of 500% or even more. I recommend that you visit if you want to know more about different types of binary options.

Different types of binary options have different maturities. Most binary options  have short maturities. The maturity of an option can range from a few days to a week.

There is also something called super short binary options that have maturities that can be as short as 15 seconds. This type of options make it possible to loose or gain money very quickly. They can be very profitable if you are able to ride a trend in the market.

Easy Money?

Binary options are often advertised as a way to earn quick and easy money. But this isn’t really true. It is possible the earn a lot of money trading in binary option but you will need both skill and luck to be successful. Most traders end up loosing money!

It is important to remember that you buy binary options from a broker that takes the opposite position. They make a profit when you lose money and lose money when you earn money. All binary options are therefore created in such a way that the broker will have an edge over the trader.  It works in much the same way as casino gambling where all casino games gives an edge to the bank.

This is easily seen in the fact that you lose all your money if the option matures outside the money but earn only 80% if it ends in the money. Binary options have their origin in the casino industry before they became legal regulated financial instruments in countries such as Cyprus and Malta.

To make money trading binary options you need to be a motivated dedicated trader. Not a passive investor. Binary options are therefore newer a good investment but rather a way to speculate on market movements.

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