Binary options can sound appealing for those who are interested in investing money but are hesitant to leap into the stock market. This is a different kind of trading in which you’re banking on a stock’s performance during a certain predetermined length of time, rather than buying stock and watching its performance. You put down a certain amount of money on the probability that a given asset will reach a certain amount or not by the deadline. If your choice is correct, you collect your own investment plus earnings (which can be 60-80% of the investment). If you’re wrong, you lose the investment.
For about as long as binary options have been popular there have been those who describe them as little more than gambling, and more risky than they’re worth. There has long been a debate with regard to sports betting versus stock trading, as people exchange arguments as to what makes them similar or different. But binary options, with their all-or-nothing nature and dependence on prediction rather than on-the-go analysis, feel even more like sports wagering than ordinary trading. This point of view has gained steam over the years, and has led to some abandoning the temptations of the market.
More recently a major event connected to this market has put even more people on their guard. The SEC announced that Banc de Binary, a Cyprus-based firm responsible for a high volume of binary options trades, would be paying an $11 million settlement out to investors harmed by its business. The company failed to appropriately register before soliciting U.S.-based customers via advertisement. That meant there was a valid legal complaint when some of these customers experienced financial losses by conducting binary trades.
Legally speaking, this was more of an issue of registration and compensation than anything else. But the idea of a major firm having to make a large public settlement seems to have shined a spotlight on some of the greater issues plaguing this particular form of investment. The scandal also led some outlets to use the opportunity to further explore other scams that can be run by binary trading firms. These firms are capable of manipulating their own listed prices for investable companies and commodities, and tilting trades in their favor. That’s not to say no one makes money, but it’s almost an openly crooked market.
Growing awareness of these kinds of risks, combined with the harmful news of the Banc de Binary settlement (and, soon thereafter, the company’s announcement that it was shutting down) should have binary trading on its last legs. It probably won’t be a mainstream option for too much longer, and that might be for the best.