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How Safe Are Binary Options
Many people are interested in investing in binary options but the question remains: How safe are binary options?
With Binary options you have more control over your wins and losses compared to other forms of trading, because you are trading on a fixed amount of investment.
Or take a look at our can a beginner make money with binary options? article for a complete guide on how to get started.
The trading system is as easy as making a yes or no prediction and this is the reason why many new traders are attracted to it. Binary options trading seems easier to traders because it is carried out on an online trading platform.
If you want to get started with binary options trading, then check out FXMaster Bot. This is an awesome free software (no downloads) that does binary options auto trading for you.
FXMaster Bot – Free Auto Trading Software
FXMaster Bot trades based on binary options signals. Once set up, it does the trading for you. The software is 100% free.
- No Download is Needed
- You Trade Directly With The Brokers
- Free To Use Software
Earnings and Losses in Binary Options are Predictable
The payout percentage and the potential earnings you will make are displayed on the platform so you know how much money you will make. The risk is capped so you never lose more money than what you originally invested.
The profits will not be affected by the price after the expiry. Binary trading allows you to make money on both directions of the price movement. You will make money when you successfully predict whether the price will go up or down by the expiry.
In forex and stock trading, you only make money when the price of the asset is rising but those types of trading are also safe.
On average, many brokers allows you to earn between 80% – 90% on standard call/put options. Standard call/put options with long expiry time are safer to trade compared to one touch options. If you lose the trade, you may get back some of your money if the broker offer refund. You get to decide the amount of money you want to invest and you can also set the timeframe.
Constant Fluctuation of Price Due to the Economy
Binary options is risky because of the nature of the fluctuation of the economy of the country. There are a lot of factors that affect the price of the asset so you can never know for sure whether the asset you are trading will be profitable.
The key is to have a good knowledge in the type of asset you want to trade if you want to have a higher winning rate. The lack of trading tools is another reason why many traders lose money in binary options trading.
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Another reason why binary options is risky is because there are many scam brokers operating around. Scam brokers are usually new brokers that have not yet obtained licensed and has many negative reviews from previous traders. Scam brokers can lie by claiming that they are regulated and putting the regulated broker seal on their website.
It is your responsibility to do research and determine whether the broker is licensed. If the broker is licensed with a recognized broker regulator, you will have to check whether the license is valid and not yet expired.
Complaints about these scam brokers can be found all over the web so if you just Google up a broker, you should be able to find out if it is a legitimate broker that operates as advertised. There are all kinds of complaints including customers who complaint that broker freeze their account for no reason, identity theft and the use of a software to cause traders to lose trades.
To trade safely, you should always choose a licensed broker that has been in the binary options industry for many years. If the broker is recommended by many traders and review sites, then it is safe to say that the broker is legitimate.
Choose a Regulated and Licensed Broker
There are a few recognized broker regulators responsible for governing brokers in different countries. For example, CySEC governs brokers in the European Union while NADEX acts as a regulator for brokers that are operating out of the North America. The regulator will perform inspection on the brokers from time to time to make sure that they adhere to the rules.
With a licensed broker, your money will be safe as it will be deposited in a bank with good standing. Besides, they will also offer insurance coverage for up to a certain percentage on the money in your trading account. You can get a peace of mind because the site of a reputable broker is secure and protected with a powerful encryption system.
Binary options trading carries risks just like other forms of trading but you can minimize this risk by increasing your knowledge. It is best to stick to trading with a licensed binary options broker that offers reasonable minimum deposit requirement, good educational resources and many trading tools.
We recommend trading with a trusted broker that has a good reputation. This way your money is safe and you won’t be scammed. We recommend HighLow for non-US traders:
HighLow – Regulated Binary Options Broker
Highlow is considered to be one of the safest binary options brokers at the moment. They have a valid ASIC license and the broker is regulated in Australia. Read the HighLow review here.
- Up to 200% Payouts
- Minimum Deposit is only $50
- Valid Australian License
What do you think, which binary options broker is safe? Let us know in the comments. And leave a like if this articles has helped you.
If you want extra safety and anonymity when trading online then you should use a VPN. Go to this website to find which VPN is best for you.
As you see, binary options are safe if you pick a trusted broker and if you follow simple rules. However there is no guarantee that you will make a lot of money if you don’t have a good strategy.
Binary Options Review – Can You Make Money With Binary Options?
Binary options have become increasingly popular over the years. Now they are being banned in countless countries. In this binary options review, you will learn the complete truth about binary options. You will learn how they work and why they are getting banned. And don’t worry, I am not a binary option promoter, so this binary options review will be the real objective truth and not some scammy promotional post.
What are Binary Options
Before we get into the interesting stuff, I just want to explain what binary options even are. Binary options aren’t anything new. I actually own a derivative book published in 1989 and already in this book, there is a short paragraph about binary options.
Binary options are a derivative just like futures, vanilla options… This means their price is based on an underlying asset which can be almost anything (e.g. a stock). Just as the name implies, binary options are options. In fact, they are exotic options meaning that they work somewhat different than normal vanilla options.
Binary Options Trading Explained
Binary options are ‘make it or break it’ bets. This means either you win a certain amount of money or you lose a certain amount of money. There is no in between. They are fixed-return options.
Usually, you can’t select a strike price for binary options. So the strike price normally is always the underlying asset’s trading price. The time frame that a binary option is active can vary a lot. But most binary options brokers only offer very short-term binary options with expiration times of a few minutes or similar.
If you are wrong on a binary option position, you lose your entire investment. If you are right, you will achieve a profit. The size of this profit depends on the payout ratio of your broker. A common payout ratio is around 70% which means that you will receive 70% profit on your initial investment if you are right.
Just like with vanilla options, two different types of binary options exist: Call and Put options.
As you can see on the following payoff graphs, a Call option profits if the underlying asset’s price increases, whereas a Put option profits from a decrease in the underlying’s price.
Call Binary Option Payoff Put Binary Option Payoff
Here is an example of a binary option trade:
The underlying asset is XYZ which is trading at $100. You decide to buy a Call binary option meaning that you think that XYZ’s price will go up. You pay $10 for the Call option. The option expires in five minutes and its payout ratio is 70%.
Now there are two possible scenarios:
- XYZ’s price increases and the option expires: If this happens, you were right and will make a profit of $7.
- XYZ’s price decreases and the option expires: If this happens, you were wrong and thus lose your entire investment of $10.
To recap, to trade a binary option, you will need to choose:
- An underlying asset
- A time frame
- An option type (Call or Put)
- An investment amount
What Most People don’t tell you about Binary Options…
Now let us get into the interesting part of this binary options review. I will now tell you something that most other websites won’t tell you:
Binary option aren’t legitimate investment products! That’s right! Binary options aren’t legitimate products!
Why? Because they aren’t fair. Just like a game of roulette in a casino isn’t fair, binary options aren’t either.
Let me explain to you why binary options are set up just like gambling products.
The payout ratio of a binary option is always less than your risk. This means you can’t win as much as you can lose. This makes them unfair products.
To understand this better, I want to present you an example of a coin flip game. You probably are aware of the fact that a coin has about a 50% probability of landing on tails and a 50% probability of landing on heads.
So the odds of picking the right side are about 50%.
Now I want to ask you a question: would you play a coin flip game in which you could lose $1 if you pick the wrong side and win $0.5 if you choose the right side?
I hope you wouldn’t because this game is unfair for you. On 10 rounds of this game, the expected outcome would be 5 wins and 5 losses. But if you would lose $1 five times and only win half a Dollar five times, you would be at an overall loss.
Over the long run, you will lose money playing this game.
Binary options work the same way as the just described game. Your wins will always be smaller than your losses. So to make any money with binary options, you would have to have an extraordinary high win rate.
Predicting very short-term price movements is very hard and therefore, it is practically impossible to make any money with binary options.
A binary option with a payout ratio of 70% would mean that you would have to have a win rate of almost 60% just to break even! And that’s without even taking commission costs into account! Even with a win rate of 60%, you wouldn’t make any money.
In addition to this expected negative return, your odds of making any money are even lower due to how binary option brokers execute your binary option positions. Often, brokers will get you into a Call option position above the current underlying asset’s price and into Put option positions below the current underlying’s price. This means that it isn’t even enough to predict the correct direction. The underlying asset has to go all the way above (for Call options) or below (for Put options) the ‘by your broker’ chosen price. This means the odds are even worse than 50/50.
And believe me, using some fancy indicators won’t be enough to make you win and the broker lose.
But doesn’t the broker want you to win?
NO! Binary options are Over-The-Counter (OTC) products which means that the broker is your counterparty. In other words, they take the other side of your trade. That is a huge conflict of interest. The broker is practically trading against you. Therefore, most binary option brokers will go as far as possible to make you lose (and to make them win).
And that is still not everything!
By far the most binary option brokers are based (and regulated) in countries like Cyprus, Cayman Island, Bahamas etc. Regulations from these countries are very sketchy and untrustworthy.
This means there is no guarantee that you will get your money back after depositing it to such a broker!
That is also the reason why there have been countless incidents of people not getting their money. So even if you are extremely lucky and win some money with binary options, you probably won’t be able to withdraw these winnings.
But why have binary options become so popular if they are a blatant scam?
Great question! Binary option brokers have done everything possible to promote their scammy binary options. When I say everything, I mean everything!
Binary option brokers have literally created thousands of fake accounts on countless sites to tell everyone how great binary options are. Just go to any forum (e.g Quora) on the internet and look at threads about binary options. Many questions and most of the answers are from binary option promoters themselves. Due to this, loads of unknowing people have become lured into the trap of binary options.
Furthermore, almost all binary option brokers offer very lucrative affiliate programs. So tons of (greedy) trading sites have been promoting binary options because the binary option brokers have been paying them to do so.
Conclusion – Can you Make Money Trading Binary Options
Once again, binary options are a complete scam and they aren’t legitimate investment products. So if you want to get into trading, binary options aren’t the way to go! In other words, you can’t make money with binary options (unless you are a binary options broker).
I am not even exaggerating when I say that your money would be better off in a casino than with a binary option broker!
If someone is promoting binary options, they are either in bed with the binary option brokers or they have no clue what they are talking about.
Here is a short recap of why binary options aren’t legit:
- You have an expected negative return
- Bad executions
- Conflict of interest
- The broker is trading against you
- Sketchy regulations
- Countless incidents of non-withdrawable money
- Shady promotional tactics
These facts are also the reason why binary options are getting banned in countless countries. Even the EU has finally recognized that binary options aren’t real investment vehicles. That is why the new ESMA regulations are banning binary options.
One example of a binary option broker is IQOption. They aren’t as scammy as some other binary option brokers, but they still aren’t trustworthy! Make sure to check out my IQOption review/exposé .
Trading is hard enough on its own. You really shouldn’t make it even harder by trading binary options. If you do, you will lose your money! No one except for the binary option broker is making money with binary options!
Besides the fact that binary options brokers are stealing unknowing traders’ money, binary options are also shedding a bad light on the entire trading industry and on normal options.
Normal vanilla options are real investment vehicles that have an actual purpose. Trading real (vanilla) options is a legitimate thing and can be very profitable. Sadly, a lot of newer traders fail to distinguish between real (vanilla) and binary options even though there is a huge difference (namely that binary options are a scam and vanilla options aren’t).
If you want to do yourself a favor and learn more about real vanilla options, make sure to check out my free options trading education .
Hopefully, you enjoyed this binary options review and learned why you should NEVER EVER trade binary options!
Have you ever been scammed by a binary options broker or have you had a similar experience?
Let me know in the comment section below! If you have any questions, please let me know as well.
Also, make sure to share this binary options review so that more people can learn about the dangers of binary options.
19 Replies to “Binary Options Review – Can You Make Money With Binary Options?”
Its being long time since i thought to go into binary options before. However i never did so as i was not sure what is real and what is just a good scam. Thenks to some of the points you pointed at i feel more confidence about getting started.
You know the funny thing is, when I first started investing in the stock market, someone told me about binary options and I looked into it.
I did a little research and even created an account, but I never put any money in it.
Like you stated, it seems like lately everyone and their mother is “investing” in binary options’ but it’t the affiliate commissions they’re interested in.
Investing in binary options isn’t easy because it leans more towards gambling.
It;s a shame that no one is actually taking the time to teach people about binary options the right way.
Thanks for posting,
Exactly! You got it.
I have had a go at binary options and it is like you said not far off gambling. Everybody gets different results so you win and some you lose. If you want to go down the route of binary options you are a little safer with a longer term option, any thing from a day to 2 hours, be warned tho the pay out can sometimes be a lot less.
Hello and thank you for this binary options review.
When I was looking into affiliate marketing, I signed up with a guy who was doing binary trading. The way his site was advertised made it seem like he was offering something else, which is why I signed up. When I found out what binary options really are (thank you Google!), I immediately unsubscribed. However, I continued to get emails from this guy.
This is a very good explanation of why binary options are not for the faint of heart, and I am glad that I did not go further with it.
Thanks for sharing. I am very glad that you found my article informative.
Great post describing how binary options operate.
I am totally agree with your point here, binary options ” make it or break it, massive profits or loosing everything”.
I do the binary trading since 2009, I must admit I lose money more by paying the brokers than do trading.
Making a killing trade is harder than eating by a shark!
I want to try out you recommended iq option here, but I would like to know if they offer any options training?
I’ll bookmark your site and come back for more info.
Thanks for sharing your thoughts on Binary Options. I see you are interested in IQ Option. You can check out my full review of IQ Option here.
Interesting articles in here. I never understood how binary options worked and you have been able to clarify this for me. Im glad I read your article. I see a lot of advertising about bitcom which I presume is the same thing. Am I right with my presumptions?
Ive always steered away from trading as I was once bitten by currency trading – buying Yen at a low and supposedly selling at a high. I need to look more into what you are offering.
Thank you for the knowledge you offer.
Thanks for the comment Paula. I am very glad to hear that this article helped you. Bitcoin and cryptocurrencies in general have similar issues. Even though they aren’t as useless and scammy products as binary options, many brokers that offer them are very sketchy.
I deeply sympathize with many consequent losses! I was one of the victims of those guys on ICP Trading Group, after waiting endlessly on my profits as promised for many months, I decided to source for other means of unblocking/refunding my shares as soon as I can.
I feel that these people are not human beings, they have no hearts, they are evil and it is absolutely best not to have anything to do with them.
This is a great article, since I’ve actually done Binary Options myself, and turned into a nightmare. Not that I invested so much in it, but everything what you state in this article is true. And it is good that you warn people about it, and in the world of today, making an investment is a big risk anyway. Keep up the good work!
I am sorry to hear that you are a victim of the shady binary options brokers. It is great to see that binary options are finally getting banned in more and more countries so that fewer people will be suffer the same fate as you.
I lost everything thing I had to Gtoptions,after months of searching had to hire a refund professional company to recover my funds. I’m glad I got a refund others weren’t so lucky. Happy to share my experience.
Thanks a lot for sharing! I hope your story helps people avoid binary options (brokers) in the future.
This is a great article. I was also a victim and lost almost all I had worked for. I do not wish the binary option scam on my worst enemy. I went broke for over a year and finding solutions to my situation was the only thing on my mind. I’m glad I did.
Thank you so much for sharing your story about binary options. Hopefully, this will help someone else avoid them. I am very glad to hear that you recovered.
Hi Louis, I’ve just started your options master course and saw this thread going and wanted an opinion on Nadex ( North American Derivatives Exchange). I’ve been trying to learn to trade binary, spread, and more recently a little bit of touch brackets with Nadex. I believe this exchange to be legitimate since they are regulated in the US and are not OTC. However their options contracts/strikes are arranged so that you almost have to day trade..the longest durations being a max of one week. I’ve had some good wins and even more losses:) I believe most of my woes come from trying to trade short term trends, and have concluded that 1) I need more duration time and 2) trading directionally in the short term is not good probability. Would you agree with my assessment? This is why I’m now getting educated in your type of options. Thanks, John
First of all, sorry for the late reply. Secondly, I personally have no experience with Nadex options. Therefore, I can’t really tell you much about them. Nevertheless, I agree with your thoughts on duration. In my opinion, it is extremely hard to predict very short term price moves because as soon as you look at intra-day (option) price moves there is a lot of almost unpredictable noise.
I really hope my education will help.
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Binary Options Trading: An All or Nothing Gamble?
Binary options trading sounds too legit to be anything but above board. After all, this involves publicly traded stocks and commodities. Lately, however, it has been criticized as nothing more than gambling, pure and simple, yet the buzz around it is getting louder and the promise of easy money is attracting the attention of people from all walks of life. What is it, really, and is it something the ordinary weekend investor like you and me should even care about?
What are binary options?
Binary is an apt adjective for this type of option. In programming parlance binary used to describe either of two states. 1 or 0. In the sports betting industry binary options are also popular – win or lose. In other words, there are only two possible outcomes. There is some basis to this all or nothing description of binary options trading. Here’s a short explanation of how it goes.
Take the price of any asset at any point in time. You make an intelligent guess on whether this price will increase or decrease over a specific period of time and bet $100 that you guessed right. If you are you win back your bet and plus a pre-agreed amount. If you’re wrong you lose almost all of your $100.
Of course it’s not as simple as that. In fact, there’s serious math behind binary options and people who engage in binary options trading, like all others involved in financial markets, are pretty confident that their numbers are better. Because in a single binary option trade, the outcome for the participants is also binary. One loses, one wins.
Let’s get a bit more technical than the simple explanation above. As currently practiced, binary options trading involves three main components.
First, there is an underlying asset, the future value of which becomes the basis for the trade. This asset can be the price of a specific company’s stock. It can be a traded commodity such as gold. Recently, there was an industry filing at the Commodities and Futures Trading Commission to allow exchanges to offer binary options for future box office receipts of certain films.
Second is the direction of trade. This is your guess of what the price of the asset will be at a specific point of time in the future and you make your trade based on whether this price will be above or below the current price at the time that the binary options contract was made. Third is, of course, the amount you wish to trade.
A binary options glossary
Like most specialized fields, binary options trading has its own jargon. These words are borrowed from the more established practice of commodities and futures trading, and gives binary options an aura similar to that of derivatives.
Current price. The price of the underlying asset.
Strike price. The price of the underlying asset when the binary option is purchased.
Expiry price. The price of the underlying asset at the time of expiry of the binary option.
Call option. The right to buy. In binary options trading, the purchase of an offer is an exercise of the option. In American exchanges this is termed as “Finish High” because the motivation behind a call is the probability that the price of the asset when the contract expires will be higher.
Put option. The right to sell. This is also exercised when the offer to sell an option is taken. This is called “Finish Low” in American exchanges because a put is based on projections that the price of an asset will be lower when the contract expires.
In-the money. A successful trade wherein a call option expires above the strike price or a put option expires below the strike price.
At-the-money. A trade in which the price during expiration is identical to the level during purchase. In some binary options contracts, such a scenario requires the initial investment amount to be fully returned to the customer.
Out-of-the-money. A failed trade wherein a call option expires below the strike price or a put option expires above the strike price.
Essentially, “options” is a misnomer for these types of transactions. “Lock” (another type of derivative) would have been the more appropriate term because once the deal is sealed, both buyer and seller are obliged to comply with whatever conditions were agreed upon to take effect at the contract’s expiry.
One other thing to remember is that trading in binary options only involves the price of underlying asset, but not the asset itself. You might be trading binary options for the price of Google or Apple stocks or gold, but there is no assumption that the seller owns any of these assets or that that you will when the contract expires.
What makes binary options attractive?
Fixed risk and reward. Most binary options are Fixed Return Options (FROs) in which the gains and losses (the risk-reward ratio) are predetermined. You know exactly what you’ll earn should you be in-the-money, or what you would otherwise lose if you happened to be out-of-the-money. In a $100 trade, for example, many options offer a return of 81% for a successful trade. Many also offer to return 10% of the purchase amount should your trade be out-of-the-money.
Capped risk. You will never lose more than what you’ve invested, which is all too possible in other investments like foreign exchange or real estate.
Assured reward. By the same token, gains are not dependent on the price of the asset during expiry. Regardless of whether the increase in price is a fraction of a point or double the strike price, the winner gets the entire payoff amount.
Simpler to understand. In binary options trading you only need to sense the direction of the price of the asset you’re trading. With regular options, you need to know both the direction and the magnitude of the price.
High level of sophistication. While easier to understand than most options, binary options still offer enough freedom for the application of sophisticated investment strategies. Investors in the forex market use binary options to hedge against their currency investments by investing in an opposite direction to their traditional forex position. Regardless of whether prices rise or fall, they’ll have their losses covered or might even profit from their binary options position.
Shorter durations. In some exchanges, many contracts close within the day. Some durations last for only an hour so the gratification (or mortification) is instant. It is possible to participate in many options within a single trading day.
Potential to profit from both falling and rising markets. In regular stock and commodity markets, money is made only when the price of the asset is rising. Binary trading allows an investor to absorb some of the market’s risk and make money regardless of whether prices are falling or rising.
Access to multiple markets. From a single account, you can have access to a wide range of markets and asset classes including forex, shares, commodities like oil futures and stock indices.
Other types of binary options
Binary options can either be cash-or-nothing, where a fixed amount of cash is paid out. It can also be an asset-or-nothing option where instead of cash the value of the underlying asset is paid out. Aside from these basic types, there are other more exotic binary options that are a bit more complex but follow the same general concept.
Barrier options are options that depend on a specific price level for their existence within the duration of the options contract. They can disappear (knocked out) or appear (knocked in) when a specified price level is breached. In partial barrier options, the price is monitored only for a specific window within the duration.
In a double barrier option, there is both an upper and lower price barrier and the double knock ins are activated or a double knockout terminates the option if any of those barriers are hit. The more complex double barrier binary option, of which there are 28 types, combines the characteristics of both barrier and binary types.
Are binary options a safe investment?
As with any other form of investment, risk is inherent in binary options. In fact, websites that guarantee returns are the ones you should stay away from. There have been complaints of payoffs not being remitted to bank accounts, so you’ll need to do due diligence before committing. The best idea is to always go with one of the best binary options brokers that you know are legitimate and reliable.
If you’re serious about trying binary options trading out, selecting a reputable trader is the first critical step. There has been a proliferation of trading websites online and it can be quite confusing to know which is legit and which is not. Start with traders registered with the Chicago Board Options Exchange (CBOE) or the American Exchange (Amex) to be sure that the firm you’re dealing with is subject to regulation. Fixed return options are more common in Europe and are traded in European exchanges heavily, thus the nickname European options. There have been reports of Europe-based sites engaging in unauthorized binary options trading.
The financial crisis of 2008 has awakened every American to the very real threat Wall Street presents to their personal financial health. The clamor for financial reform has resulted in the Dodd-Frank Act being passing into law in 2020. However, regulation for binary options trading is not explicit in the implementing rules and guidelines although proposals for rule changes have been discussed in the Securities and Exchange Commission (SEC) and predate the creation of the Dodd-Frank Act. For now and until the rules are in place, prudence in this investment area will always be your biggest safety net.
Are binary options a good investment?
Yes, if you have the stamina to monitor prices closely, the diligence to study the history and performance of the underlying asset you’re trading, and no past history of compulsive gambling.
Forbes columnist Gordon Pape issued a strong warning against binary options. He claims that this form of trading appeals to the online poker crowd and market junkies who tend to be more exuberant in taking chances than the ordinary investor. In fact, he refuses to acknowledge binary options trading as legitimate investment. He insists that it is a pure gambling activity where the odds are stacked against the investor.
Gordon Pape claims, as do others, that you need to win 54.5% of the time to just break even. For some, these odds are good enough, even if the house gets the better deal. For the house, it’s like having hundreds of slot machines that won’t ever pay out a jackpot. For the investor, on the other hand, binary options multiplies his chances of winning each time he cranks the machine. Not the jackpot, maybe, but big enough if one keeps at it and does the homework.
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