Are Binary Options Just a Form of Financial Betting?
We’re often asked if trading binary options is the same as financial betting. The short answer is no, but there are some similarities, and binary options could certainly be used as a tool for financial betting.
The United Kingdom’s tax on stock exchange and futures transactions encouraged the development of financial betting as an alternative for short-term speculators. Financial betting experienced tremendous growth with many traders favoring online CFD's, spread betting and forex providers to traditional trading alternatives. The problem is products such as spread betting, Forex and CFD's are often too complex for the average retail trader, and extremely risky.
The key difference and advantage of binary options over the aforementioned forms of financial betting, is that from the outset you know your maximum loss and maximum gain. Binary options will either pay out a fixed, known return, or nothing at all. The possible return and risk is predetermined and fixed prior to the transaction. Therefore, all a trader has to do is anticipate in which direction the market is going to move and decide how much to put at risk. Most binary option brokers will allow you to place trades as small as $30, which once again makes it attractive to gamblers.
To trade binary options successfully, you do not need to spend time learning complex options trading strategies. You also don’t have to understand complicated options pricing theories, or understand how implied volatility works. All you have to do is accurately predict if a given security is going up or down from its current price, over a term as short as an hour. If you’re correct, you’ll be rewarded with returns as high as 81% over that short period of time.
Binary options are legitimate trading vehicles that trade on major exchanges, and have useful purposes in investment portfolios, particularly as a short-term hedge. However, the ease of accessibility, accompanied by the simplicity to set up accounts and implement trades, has made binary options trading very attractive to those who are interested in gambling; especially those who are interested in a game of skill, rather than a game of chance. Trading binaries involves predictions on real securities trading on real markets in the real world, as opposed to a game of chance that is based on randomly generated numbers.
The bottom line is that binary options are a tool. They are a tool that can be used for short-term market speculation, hedging a portfolio, or financial betting. The Super Bowl is a tool used by the NFL to determine the best football team in the world. However, it’s also a tool used for a tremendous amount of gambling. It just depends on how you choose to use the tool that matters.
If you're going to trade binary options there are a lot of brokers to choose from. However, we feel that Global Option is by far the best one.
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