How does binary options work, are they safe?

Question

I have been hearing a lot about binary options, on how easy it is to make money on it in a short time, etc. One of my friends actually joined a business school where they teach about different kinds of marketing and they start with binary options, which my friend is currently learning. He has asked me to join as well since they now have 1-week free trial, and I had a meeting with the vice president of the school about the things that they teach. But I was wondering, are things like FX and binary options as easy as they say it is? If you can double your money in a blink of an eye, just like how the vice president said, why is not everyone doing so? I am really cautious about where and what I spend my money on, and I rarely believe in a positive outcome when it comes to gambling. I have heard binary options depends on just a prediction, high or low, and you do not need any skills for it. So, what are they going to teach me exactly at the school? Some ritual which will increase my luck? Or do they actually teach something; like how to read charts and how to predict what will happen? Are binary options actually safe and does it really depend on a simple prediction, regardless of skills and chart-reading? I do not mean to make a living out of it, I am attending a University in Japan and just got into 2nd year, where I live with my family, and I would be happy to make some money by sitting by the computer for just 10 minutes or so, spending as less as $10 to $50.

Answer 1

Definitely not safe. Binary options are not investing, just online betting at stupid odds (bet 100 to win 80) that are worse than any casino game.



Read the link Zman posted from the SEC.

Answer 2

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An option is a contract between two parties, When an option contract is opened one party (the buyer, called the holder) pays the other party (the seller, called the writer) a sum of money (called the premium). A premium is quoted in a price per unit, such as a share a single share of stock. The contract specifies an underlying security (such as shares of a particular stock), a quantity of the underlying security (such as 100 shares for a stock option), an expiration date/time, and a strike price.



A binary option is one that pays either a fixed amount or nothing. This is done by comparing the strike price with the price of the underlying at expiration.



Example:



Underlying security: shares of XYZ stock

Quantity: 100

Strike Price: $40.00

Expiration: 4:00 pm January 15

Payout: $1 per share ($100)

Premium to buy a contract to be paid if the stock is over the strike price at expiration: $0.75 ($75)

-- Profit if the stock is over the strike price: $100 - $75 = $25

-- Loss if the stock is under the strike price: $75

Premium to buy a contract to be paid if the stock is under the strike price at expiration: $0.65 ($65)

-- Profit if the stock is under the strike price: $100 - $65 = $35

-- Loss if the stock is over the strike price: $65



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No. You risk losing 100% of your investment ($100 per contract) in order to try to make a fraction of that amount.

Answer 3

most option buyers lose money. This is because the big players have far more information and thus have an advantage you can't overcome.



Even software with great market information and a fast computer can't overcome the much faster gear of professional players.



While it is possible or even likely that trend following can work in short time periods, there always comes a time when market conditions have changed so much that they fail. Surviving that change in conditions requires that you identify the change promptly ... not very likely.

Answer 4

Massively risky. Its not a business school, its a scam. AVOID.



Options like that are for stock market pros. I have 30+ years of stock market experience and have made a lot of money over the years from stocks. I would not touch them.

Answer 5

HAHA they can work, but in my opinion they are not safe. They are extremely risky. I had a friend who put $2,000 into binary options, worked it up to $14,000 in a couple of hours, then lost it all in another 20 minutes. It is a virtual casino.



Generally people use technical analysis to predict price action over X number of minutes or hours.



Better off sticking with less risky investments in my opinion.