• Home
  • About
  • Advertise
  • Contact
  • Policy
  • Guest Post
  • Archive

One Cent At A Time

A Personal finance blog to get rich

  • Email
  • Facebook
  • Pinterest
  • RSS
  • Twitter
  • Beautiful Life
  • Becoming Rich
  • Beginners Guide
  • Extra Income
  • Productivity
  • Saving Money

Binary Options – Scam or Legit?

July 22, 2015 3 Comments

Share this:

  • Tweet
  • Email

Compared to most other investment types, binary options are a relatively new retail investment vehicle; and as with most new things, there are several questions revolving around the concept. One of the most pressing questions is, “Is binary options a scam or an investment opportunity with real potential?”.

Today, we’ll discuss what binary options trading is and how it works. We’ll also take a look at why some consider it a scam and whether or not it really has any potential to be a profitable investment vehicle. So, let’s get right to it, the truth about binary options trading.

First thing first. I never did a binary options trading. Partly because it’s risky to my appetite and partly because I am not much confident to start without researching to my satisfaction. This is a result of the research I carried out so far.

When I’d start with binary trading?

I don’t know, it’s still risky to me for the sheer 50-50 outcome.

What Are Binary Options

Binary options are an investment vehicle that is incredibly unique. When trading binary options, the traders don’t purchase any amount of tangible assets. Instead, they simply make predictions as to whether the value of assets is going to rise or fall.

Also, as the name of the trading option suggests, binary options are indeed binary. This means that there are only two possible outcomes to trades.

Either the trade ends in the money and the trader realizes a predetermined profit or the trade ends out of the money and the trader realizes a predetermined loss. Here’s an example of a binary options trade…

For this example, let’s say that stock ABC is trading at a rate of $50 per share. Through extensive research, a binary options trader decides that the price of the stock is likely to climb to $52 per share over the next 24 hours.

So, the trader purchases a call option on ABC with a strike price of $51 per share (leaving room for slower than expected growth) for $100. The trader knows that if he is correct, he stands to gain a 70% return.

Adversely, if he is incorrect, he stands to lose his principal investment. After 24 hours, ABC is trading at $51.57; a value that is above the strike price. As a result, the trader receives his principal investment of $100 plus $70 as gains on the trade.

Investopedia has a more in-depth explanation of how Binary options trading works.

Why Some Investors Call Binary Options A Scam

There are two primary concerns that some investors have with the idea of binary options trading. Here they are…

  • No Asset Is Purchased – In most forms of investing, investors purchase assets. In the stock market, stocks are purchased; in commodities gold, silver, oil and more are purchased; and in forex, currency is purchased. However, in the world of binary options, a contract is purchased, not a formal asset. As a result, investors believe that there is little to no value to the investments made in the binary options space.
  • No Trader Can Be Correct 100% Of The Time – There’s no doubt that traders aren’t psychics; if that was the case, no research would be needed and the trader would earn returns 100% of the time. Some investors argue that because of this, traders are more likely to realize losses than they are to realize gains.

Now the question becomes, “Is there any validity to these concerns?”

Is Binary Options Trading Really A Scam?

The bottom line is that binary options trading is not a scam. First off, assets don’t have to be purchased to generate a return on investment. While no exchange of assets may insinuate higher risk, the fact that binary options traders know how much money they stand to gain or lose on each trade actually makes risk management a much simpler process.

Also, those concerned about accuracy rates are correct, no trader can be right 100% of the time; and if you simply guess with every trade, chances are that you’ll be right 50% of the time. This won’t generate a profit as traders generally need to be correct about 60% of the time.

However, that’s not very hard to do. In reality, with a little research and analysis, it’s not uncommon for traders to be correct around 75% of the time; generating a very decent profit in the process. So, at first glance, I can definitely understand the concerns outlined by investors with regard to binary options.

However, when all is taken into account, those concerns are debunked and binary options prove to be a viable investment.

What Do You Think?

I am not saying the binary option is safe. All I tried to say is binary options are legal and legit in many countries including the US.  It’s risky for me but may not be for you. Also, if you’re US resident, make sure the broker you choose is not an offshore broker and is licensed to do business in the US, before you sign up for a binary options broker.

What is your opinion of binary options as an investment vehicle? Let us know in the comments below!

LIKE THIS POST?
I agree to have my personal information transfered to MailChimp ( more information )
Join our community of 8000+ subscribers to increase your net worth and build wealth
We hate spam. Your email address will not be sold or shared with anyone else.

Share this:

  • Tweet
  • Email
The tool that changed the way I manage my personal finance - Personal Capital, The Best Free Personal Finance Tool

Want to start a WordPress blog now? The onecentatatime.com blog is hosted by Siteground Web Hosting. For only $3.95 a month, Siteground can help you set up and host your website/blog quickly and easily.

About the Blogger Hi I am SB, a personal finance enthusiast with a career in software development. I am an immigrant to the USA since 2005, after being born and brought up in India. This 40 something technocrat lives and breathes personal finance whenever he gets time from the day job, job as a husband and a dad

Some links on this page may be affiliate links, if you make a purchase following the links, I may earn a commission. Read affiliate disclosure here
« Some Second Income Ideas
Some Tips for Buying a Used Car »

Comments

  1. Tortoise Banker says

    July 23, 2015 at 3:33 PM

    Meh. I’ll take a boring index fund over most other options… (options… pun?)

    Reply
    • SB says

      July 23, 2015 at 9:55 PM

      I am proud of my index funds too 🙂

      Reply
  2. Beth Murphy says

    September 25, 2019 at 8:35 AM

    When I got scammed by my binary option broker last year, I was suicidal after several failed attempts of call back. Till I was referred to agencies to get my money back, they was able to recover a total of 120k I lost last year to Glenridge capital, they are the best and I advise there contact if your in need of a full recovery.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.



Create your own blog in 20 minutes and $20

Personal Capital, a free tool to change your financial health today

I use and suggest Upstart, for your personal loan need

CreditKarma, a free tool to check your credit scorey

I use Coinbase, for my crypto investments

101 Cents at a Time

101 Ways to Earn Extra Money on the Side
201 Frugal and Perfect Birthday Gifts
101 Ways to Save Money Everyday
101 Ways to be Better and Successful at Work
101 Ways to Save Environment and Energy
101 Frugal and Romantic Anniversary Ideas
101 Low-Cost Men's Fashion Ideas
101 Personal Finance Tips
101 Ways to Reuse Household Stuff
101 Things to Do, When Nothing to Do
101 College Graduation Gift Ideas
100 Tips for Ecommerce Startup
101 Ways to Enjoy Indoor During Winter
101 Ways to Beat Procrastination

Popular Posts

Quick Cash - How to make $100 legally, in a day
Living well on less than $15,000 a Year
Top survey sites for side income
What to do when auto repair goes wrong
Where should I invest my money now?
20 Ways to be productive and happy at work
51 Ways to get out of debt
Be a better person in 15 days, 15 ways
Income ideas for retirees and senior citizens
51 side jobs for college students
Urgently need a large amount of money?
Should I buy or should I rent?
Best Personal loan providers
25 Ways to save environment
25 DIY car repairs to save money
How to decorate office cubicle
How to show your wife you care
50 Financial Rules for Success
51 Frugal weekend family activity ideas
Become Rich By Saving 1 Hour Of Daily Wage
How much do I need to save for retirement?
How to negotiate your salary

Follow us on FaceBook

About Author

SB

Blogger by choice and IT manager by profession. Finance is my passion and gardening is my greatest satisfaction. Born in India, settled in US, Husband and a father. I created this blog in 2011 with a vision to help others. Thanks for your patronage. More info on my "about" page.

View all posts


Subscribe

Join our community of 5000+ subscribers to increase net worth and build wealth

Advertisements

Personal Stories

How I got a new HP computer replaced
Was COVID circulating in USA in fall of 2019?
How my credit score went up 800+
Why I didn’t invest in Bitcoins
How I controlled impulses to buy things
Why this blog is named One Cent at a Time

Subscribe via Email

Site Disclaimer

Disclosure of Material Connection: Some of the links in this web site are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
Read full Affiliate disclosure


One Cent at a Time is published by SB. The opinions expressed herein by him are his own and not those of his employer or anyone else. All content on One Cent at a Time is for entertainment purposes only. By reading this blog, you agree that SB and/or One Cent at a Time is not responsible for any actions taken after reading this blog. For the full disclaimer, click here .

Major Media Mention

One Cent at a Time Media Appearances

Copyright © 2023 One Cent At A Time · Designed by Nuts and Bolts Media