Binary Options: Scams to Avoid

Let's start by explaining what binary options are (those who already know what they are can skip this part) and then what is a scam and why binary options and scam have ended up being two frequently associated terms. We will name the major scams that unscrupulous brokers (fortunately less frequent), as well as a list of honest and regulated brokers that guarantee that their traders do not have any bad surprises.

Binary Options and Scams: Easy Money Bait

Binary options are a simple and accessible financial instrument that allow you to lose or win very quickly. The idea of ​​making money fast on the Internet attracts many netizens, and therefore also malicious brokers ... Let's define these terms to see it more clearly.

What is a binary option? 

Options are types of financial contracts. Investors, or "traders" who practice them, call it "trading options." The number and complexity of the options available in the market is very important and varies completely from one contract to another. Think of the options called "binary", which for some years have been accessible to any particular on the Internet: we speak of " binary online option ".

Binary options are probably the simplest and most accessible form of investment for Internet users. As the name implies, it is a "binary" option, that is, it can have two possible outcomes at the end of the contract. It automatically closes when the expiration time is reached: it is then spoken of expired contract. At this time, either the contract objective is reached and the bearer takes a profit whose amount has been predefined at the time of opening (it is also spoken of rate of return), or the target is not reached and the owner of the option suffers a loss of which a percentage of the amount of the initial investment is returned (it is then spoken of loss ratio).

The web pages that propose online binary option trading are often called "brokers" or "brokers". These binary option brokers are numerous and offer offers, promotions, financial instrument panel, quality of execution and quality of customer service that may differ greatly from one broker to another. Some brokers, when the binary option came out to the general public a few years ago, were even accused of "fraud", "scam" or "scam".

What is a binary option scam? 

A scam is a hoax, a scam that leads the investor to error with the aid of fraudulent means. It results from an organized and surely deliberate will to deceive. 

As you have easily realized, the Internet is literally THE rotary platform of the scam: a place conducive to the development of scams and all kinds of frauds (traps, spam, deceptive methods of easy money, moneylending ...).  

The scam takes place particularly in the finance sector, where the majority are looking for "great opportunity". The greedy objectives of perfect investment (guaranteed profit, simple investment, reliable and secure ...) are very numerous: we are all part of them. 

In our case in particular, in the matter of binary options, the scam is generally to deceive you as to the profitability of the investment, to promise guaranteed profits or to ensure the professionalism of the financial advisers and brokers. 

In fact, and as we have seen previously, to invest in the market of binary options is necessary to go through the brokerage brokerage. 

We then wondered whether this speculative product was created for the sole purpose of deceiving the investor or whether it had simply been the prey of unscrupulous brokers. 

Is the binary option a real scam?

You have been able to read in the forums or in numerous articles that some even question the reliability of the binary option product.  

The binary option is a product speculative par excellence, and the term "option" does not hide that the results can be random. Anyone wishing to invest in financial markets should be aware that it is possible to make significant profits but that loss is also possible. And here is where the scam came: make believe in a guaranteed profit, a very attractive and habitual profit, such as "how to earn 7000 euros per day with our infallible method to win on the stock market."

Numerous brokers got involved in this matter, which presented the novelty of this product recently opened to individuals. But we did not want to stay here, since the attractiveness of binary options is much more important. Let's dig deeper than these unscrupulous brokers and find out how to make money without risk with binary options . 

Our best method to make money easily: the binary option, no scam

Binary options are financial investments like so many others and do not present more or less risks than other products of the markets. In fact, the markets are based on speculation and this is how thanks to this risk they report so much. 

To say that this investment is a scam would be to conclude quickly that the financial markets are themselves a great scam. Although some still think it, these markets report money and we have decided to take advantage of it. 

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Types of Binary Options

Binary options can be classified taking into account different variables.

1- According to the moment in which the liquidation can be carried out

A- European or With Maturity

This type of option exists when the default condition is met or not, only at the expiration of the chosen term and not at any time prior to it.

Example: You buy an option based on the fact that Apple's stock is going to rise at the close of the day. If at the end of the day this condition is met you will be entitled to the total of the predetermined sum. Of the opposite option will be worth zero.

B- American or Pre-Maturity Settlement

This kind of binary option is the one that allows its settlement at any time before the expiration date, once the predetermined condition has been met.

Example: You buy an option based on the criterion that Apple will drop 10 points before 16:00 CET.

If this option goes down to that level at any time of the day before the expiration date, the option will be settled immediately and you will win no matter what happens after the condition has been met.

2- According to the behavior that the asset must have for the option to generate utilities

A- With Single Barrier or One Touch range

In this type of binary option, it is sufficient that the asset arrives once, at any time before maturity, at the price predicted by the investor. If this happens the investor will be credited to the value agreed in advance, otherwise the option will be worth zero.

B- With Double Barrier Reach or Double One Touch Reach

The investor may set two limits to which he considers that the asset can reach. If the asset touches any of them, the investor will be credited to the default value, otherwise the option will be worth zero. This type of option is quite popular in the currency market and is used by investors who predict sudden changes but do not know exactly in which direction.

C- No Single Barrier Scope or No Touch

The investor will establish a limit value, to which the asset can not reach; If you do the option will be worth zero, otherwise the investor will be credited to the predetermined amount.

D- No Range of Double Barrier, or Range

In this type of binary option, the investor will establish two limit values ​​within which the asset will move without touching them. If it is accurate and the asset does not reach either of the two limits, the investor will receive the value of the option determined in advance; Otherwise the option will be zero.

3- According to the condition that must be given for the option to generate utilities

A- All or Nothing, Cash or Nothing

This is the basic type of binary options, in which the option will generate profits to the investor if the predicted rise or fall condition is met at the time of purchase. If this condition is not met, the inverter will receive nothing.

B- Asset Allocation o Nothing o Asset or Nothing

This classification is very similar to the All or Nothing type and is valid only for Binary call purchase options. In these, the option seller will not pay anything if the underlying value is below the strike price and will pay the price of the asset agreed upon at its price is higher than the exercise price.

C- At the Money

In this type of options, the holder of the same, will receive the default if at the expiration the value of the asset, is equal to the strike price, ie if it is in "at the money". If this condition is not given the investor will not receive anything.

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Binary Options vs Forex

What are the binary options?

Binary options is a contract in which the trader selects his prediction about the future price of a particular instrument in a given market called the underlying asset . This prediction may be the same, more or less at a price chosen by the trader, known as exercise price or strike price. Next to the prediction, the trader chooses a time horizon, a term for its prediction. After this deadline, not before or after, you will see if the prediction that the trader made is correct or not. In case the trader is successful he will win and he will lose.

If the trader is correct it is said that he has closed In The Money and will be paid the benefit offered by the broker. Otherwise it is said that the trader has closed Out Of Money and loses all of his investment. The most frequently offered benefits are around 70% and losses are usually not of the total but around 90%, although this depends on the specific offer of each broker.

In the trading options and normal trading, profits and losses are calculated based on the difference between the closing price and the entry price. In binary options there are only two options: either you win everything or you lose everything, hence its name.

The difference between Forex and binary options

The currency market and binary options share a common basic component: business decisions are based on future price prediction (see What is Forex?). In both cases there is analysis and speculation. The main differences from a practical point of view are the way in which the benefit of an operation is calculated and the duration time.

The forex market is a spot market , a market in which the buy-sell contracts are executed at the moment and the trader pays the market price at that time. In binary options the trader does not pay "a price" for the asset, he invests speculating on the direction of the price.

In relation to the previous point we reach the biggest practical difference: the way we calculate the profit and loss of an operation . In the forex market, being a spot market, when you buy and sell you pay the market price. Profits and losses are calculated by subtracting the price paid at the close of the transaction less the opening price; You get the number of pips. The value of each pip is multiplied by the number of pips obtained and the profit or loss of the operation is reached (learn more in the pip and batch and in how to calculate the value of a pip).

In contrast, in binary options, profit and loss are calculated as a fixed percentage of the amount invested. Of the final price we only care if it is greater or less than the exercise price, not its exact value. In other words, opening a binary option already knows how much you can earn and how much you can lose no matter how far the market comes. The possible amount of gain or loss will remain constant and is known from the time of purchase of the option.

Another very important difference is that in the forex market you can have the trades open indefinitely while the binary options have an expiration date set in advance and that, in general, is very short term and can not be executed before or After this date.

If we look at what is described in these paragraphs, the potential profit in the spot forex market is virtually unlimited while in binary options it is limited from the outset to a fixed percentage. As the price moves in our favor, the profit in forex increases, in the binary options the final profit is fixed and known in advance.

• We decided to open a 1 lot lot in the EUR / USD at price 1.3300. After 24 hours the EUR / USD has reached 1.3400. We have obtained 100 pips of profit, at 10 USD each pip, it makes a total of 1000 USD of profit. If the price had gone against, for example up to 1.3250, we would have lost 500 USD.
• At the same time we bought a call option for 250 USD since we believe the price will go up in 24 hours to 1.3400 or more. If after 24 hours the price has reached 1.3400 or more, we will get the amount invested (250 USD) plus 70% (may vary depending on the broker), that is, 425 USD (benefit of 175 USD plus 250 USD invested) . If, after 24 hours, the EUR / USD price is below 1.3400 we will lose 250 USD (some brokers will return 10% in out of money options , in this case we would lose 225 USD and we would have 25 USD).

You also have to take into account the risk associated with each type of trading . In forex you can manage your money and operations in a much more flexible way through monetary management and risk management (see Definition of monetary management and the article Introduction to monetary management) and operate in accordance with these principles. Thus, net positive results can be obtained even with a ratio of winning trades below 50% (see the series Risk: Forex Profit ). In binary options, with a typical 70% benefit in In The Money and 90% loss in Out Of Money options, you need at least a 56.25% hit ratio to end in breakeven losses).

I hope you have been more or less clear about the differences between the two, if not, ask, I will be happy to respond as far as I can. And I ask you: do you attract trading with binary options? More than the forex market? why?

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Is it a good idea to invest in binary options?

The financial is one of the fields where greater innovations are appearing, a consequence of the maturity and perfection of the markets.

Within these, in recent years have emerged new products and mechanisms with which to operate and be able to make money quickly, always the result of high volatility

Binary options are an investment system in which bets on the rise or fall in the price of underlying assets that are listed on a stock market for a certain time. There are two types of system, cash or nothing, in which an amount is earned if at the option expiration it is quoted above in-the-money or otherwise out-the-money, . The other system is active or nothing, in which the value of the underlying asset can be earned.

The main characteristic of these products is that it is about predicting if the price of a good will go up or down during a specific period and there are only two options, win or lose everything, hence the name binary, and where Yields can reach 50%, 70% and 80%.

Of course, this is a high risk mechanism because of its volatility and the amounts involved and where the operations last very little time, sometimes up to a couple of minutes. Emulating a bidding system, and where the speed in the management plays a fundamental role with respect to the other agents.

In the same way, it is also important to choose a good trading platform and operations, which has the quality and legality necessary to perform operations properly:

"Whether or not it is outside the law." In all the countries (Spain also) there are official regulators that accept and homologate the operators. It is a matter of vital importance.

-History of return. It is essential to take into account the profitability and the baggage of the platform when choosing one to manage our money, such as the trading platform anyoption, 24option, Iqoption or the Anglo-Saxon Banc de Binary.

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How to trade binary options?

Explanation with an example : let's say at this moment, I see that the price of oil is now at 46 dollars per barrel and I think, according to my analysis (which you can learn later on this site), that price will rise to 47 Dollars within an hour. Well, all I have to do is open a CALL option with an amount of money that I am willing to invest (for example $ 100) and expire within 1 hour.

If after that time the price of oil is higher than it was when I opened the option, then  I won! . In that case they will pay me 80% (on average, because it depends on the broker you use) over the risky capital (100 dollars). In other words, I will have 180 dollars . If the price went down instead of going up, that is, my prediction failed and after the hour is lower than it was when I opened the option, then I lost my 100 dollars.

In the event that I had thought that the price would be lower than $ 46 in the next hour, I should have opened a PUT option . The mechanics is the same as explained in the previous paragraph regarding the gain or loss. And this is how binary options work .

To end this boring theoretical part, I clarify that you will need a broker. It is a company that allows you to participate in trading binary options . But you can read much better in the section broker .

Can you live on binary options?

This is a recurring question for both newcomers and those who have been around for some time. I always answer the same thing: binary options are like any business or risky investment, if carried out with responsibility and discipline you can live off it . In my particular case, it is one of my constant income since I have other businesses as well.

But in the world of speculation, you have to change that misconceived philosophy of thinking about "living" something, replacing it with the powerful concept of "profitability" of something. Concentrate on being profitable and you will see that this question does not make sense.

Differences between forex and binary options

Here is a serious error of concept. Forex, is the global currency market while binary options are a speculative instrument related to several markets (among them the currency) but without directly participating in them.

Now, if we refer to operational differences between doing trading in the forex market and trading in binary options, the basic differences are:

• With the binary options you can speculate based on several markets: currencies, commodities, stocks, indexes. In forex trading only speculation about the foreign exchange market.
• Although in both cases the objective is to correct the future direction of movement of an asset, in binary options the gain is fixed and is obtained simply by hitting that direction by the least of the difference. In forex trading, in addition to guessing the direction, the gain will depend on "how much" the asset moves in that direction.
• In binary options transactions have an expiration time that determines the gain or loss. Doing forex trading is not time-limited.
• If you trade in forex, you can close the transaction at any time. But in binary options it is necessary to wait until the maturity of the same.
• In binary options, the loss and gain of each transaction is fixed and established by the broker. In forex trading that is decided by the trader himself.

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