Binary options are sophisticated financial instruments that have either one of two payoff options.
They have fixed monetary amounts or nothing at all. Binary options are based on a prediction system where one predicts whether the value of stocks, assets, and other items will go up or down. If the prediction is correct, the investor is handed the payout. If not, all is lost. It’s an easy way to make lots of money or lose it. So are they regulated? The answer is yes. Binary options are regulated, and in the U.S, there are loads of trusted brokers where one can trade them.
The regulations behind binary options are not there to protect you from trading losses. Instead, they are designed to keep traders away from scam trading exchanges. To help you understand the importance of regulations, you need to look at the crypto market. The crypto market, while highly profitable, is unregulated. The result is that exchanges can do pretty much as they wish. One of the most common issues quite rampant in unregulated markets is wash trading. Wash trading is a situation where an exchange creates the impression of high trading volumes to attract unsuspecting investors. Any asset hit with wash trading usually ends up in losses for investors once the volumes dry up. Millions of dollars are lost often due to wash trading. In a regulated market such as the options markets, such problems are non-existent.
Another problem that comes with unregulated markets is that of theft. Again using the example of the crypto market, many exchanges have folded up and left with investors’ money. The latest to do this was a Turkish crypto exchange fraud. The exchange went offline with over $2 billion of investor monies, and the personal data of over 300k people.
Such issues should give you an idea of why it is important to trade in regulated markets like binary options. Besides, trading binary options comes with a number of advantages, some of them are as below:
Advantages of Binary Option
Binary options are quickly gaining popularity throughout the world, and this is based on their simplicity. Understanding binary trading is easier than other options, and they are also very easy to trade. With a quick look through several websites and related resources such as tutorials and blogs, the concept is easily understood.
Secondly, one does not require a substantial initial investment to open a binary trading account. A binary options trading account can be acquired with as little as $5. The payouts are also desirable. The higher the amount invested, the higher the potential return. Binary Options also come in both long and short-term duration options. The idea is to cater to the needs of different traders whether willing to trade in the long or short term. Trading short durations is best for those looking to make a quick buck within a short period. Last but not least, Binary options offer investors the chance to trade in different markets, from stocks to commodities to forex, among many others. They are also popular because one can make money regardless of the state of the market. Whereas stocks are highly dependent on market trends, binary options only depend on one’s predictions. Because they offer fixed returns, one can calculate how much they will get before investing. This means that one is aware of how much they stand to lose and thus helps them to make better decisions before investing.
Risks involved in Binary Options
In as much as they are a good way of making money, binary options are not without a few risks. Binary options trading is highly speculative and involves high levels of risks to make significant returns. One should, therefore, only invest amounts whose losses they can bear. The catch is that the higher the investment the higher the returns, therefore more people are faced with the temptation of investing heavily. Because of their unpredictability, historical trends cannot be used to predict the outcome. Trading is therefore heavily dependent on guesswork and luck. Because of this, they are not considered safe as one stands the risk of losing all of their investment. Binary options trading is also volatile as the prices of commodities and assets can drastically fluctuate due to unforeseen circumstances. In some cases, clients trading under representatives may not see their trading positions and may be misrepresented if their representatives have different interests. The trick to winning is to learn as much as you can, the trade on regulated exchanges.