WHY You Don’t Make Money With Binary Options | STOP Buying Binary Options Trading SCAM Softwares
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Introducing: Binary Options
What Is Binary Options?
There are lots of ways to lose your money in this world but here’s one I hadn’t encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com, etc. etc.
The sites appeal to the same type of people who play poker online. But they somehow have an aura of being more respectable because they represent themselves as offering a form of investing. Don’t kid yourself. These are gambling sites, pure and simple. It’s probably just a matter of time before regulators move in on them.
Until that happens, they seem to be doing great business. A Google GOOG -0.97% search for binary option Web sites produced 870,000 hits with promotions like “earn up to 75 per cent every hour” and “81 per cent profit in one hour or less, trade all major markets”. You can buy these options, which are also known as all-or-nothing options, digital options, or Fixed Return Options (FROs), on stocks, commodities, indexes, foreign exchange, and other derivatives.
In fact, you can place a bet (which is what it really amounts to) on just about anything that is publicly traded, depending on which Web site you use (some offer a wider range of choices than others). Some sites provide free guides to binary option trading to get you started.
I was alerted to this phenomenon by a reader who sent me this email:
“My dad has recently gotten involved with trading binary options online. The basic premise for the site he uses is at a specific time, say 1:25 p.m., you can put down perhaps 0 that XYZ stock will either increase or decrease in price within five minutes—by 1:30 p.m. If you are wrong, you get back. If you are right, you win about .
“I’ve proven to him that, mathematically, the site has an edge and you must be right 55% of the time in order for your bet to have a neutral expected value. I am also a professional online poker player by trade so I have an extensive understanding of probability, the online gambling markets, and how these sites work.
The problem is he feels he is at a great advantage, citing his ability to read a bunch of charts, follow news, etc. He is a smart man, a former lawyer, and has been following stocks for years, but I feel that he may be overestimating himself here. I’ve looked into online binary options trading a bit and it seems to me that the consensus is that very few people outside of professional traders can beat the trading sites consistently for good money. My dad is up ,500 or so betting 0 and . The best I could do is to warn him about statistical variance affecting his perceived ability and that short-term volatility along with the inherent disadvantage will make consistent winning incredibly hard.
“I’m looking for a way to definitively convince him to stop and that his edge isn’t as great as it seems. I tried talking to him multiple times about the subject but I’m not as knowledgeable about the field and ultimately that becomes my shortcoming when trying to convince him why he shouldn’t continue to be involved with this. Any help would certainly be appreciated.”
I found this correspondence especially fascinating because the writer is a professional online poker player—a gambler by trade. Yet here he is trying to convince his dad that online gambling is a bad thing. I agree, it is. But it’s understandable if the father is skeptical about advice from a son who does the same sort of thing, albeit in a different form.
But that’s for them to sort out. What intrigued me was to discover that binary option trading has become a kind of pseudo investing sub-culture. I went to the site our reader says his dad uses and did some research. It describes binary options as “an exciting new type of investment”—note the use of the word “investment”.
“When 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 us, the seller,” the Web site explains. The option must be held until maturity (even if that is five minutes away); unlike regular options it cannot be sold before then.
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