Are binary options a safe investment?

active-investing-wsjBinary options are tradable assets that offer more flexibility than conventional options or assets like stocks. According to the US Securities and Exchange Commission (SEC), a binary option is a contract whose payout largely depends on the outcome of a yes/no proposition/bet. 

Here is some more information about binary options to help you decide whether they are a safe investment:

Busting Binaries Myths

Although binary options have been around for years, some traders consider them highly risky assets based on nothing more than unsubstantiated myths shared online and by word of mouth. A common myth that you may have come across is that all binaries platforms operate illegally. The truth is some but not all platforms engage in fraudulent schemes. According to the SEC’s Office of Investor Education and Advocacy, some binaries platforms are legally listed on registered exchanges. This is in addition to others that are subject to oversight by the CFTC or SEC.

This means that investors who transact business with such trading platforms enjoy the same investment protection privileges stock or commodities market investors enjoy. However, the SEC warns that such platforms constitute a small portion of the entire binaries trading industry. The majority of binaries platforms either operate or are registered in foreign jurisdictions that are not subject to US regulatory requirements. As such, they can easily engage in illegal trading activities.

The SEC says that the lax regulatory around binaries industry has played a big role in the rising number of web-based trading
platforms. To avoid losing your money, use platforms that satisfy the SEC’s or the CFTC’s regulatory requirements. You can verify a trading platform’s SEC registration by visiting FINRA’s Broker Check webpage at www.finra.org/brokercheck. 

Another common myth revolves around the high risk associated with trading binaries. A closer examination of this myth shows it is misplaced because the outcomes of binary options contracts are usually tied to underlying assets like stocks. This means their risk is no more than the risk of the underlying asset.

Why Trade Binaries?

There are various reasons why binaries are a safe investment choice.

To start with, they allow one to trade a wide range of assets that are unavailable elsewhere. These include futures contracts, metals, commodities, REITs, and bonds. Secondly, binaries make it easy for one to diversify his/her portfolio thanks to the wide range of underlying assets available.

Another major benefit associated with binary options is high risk-reward.This means binaries offer huge returns to investors relative to their risk profile. In fact, most binary options platforms offer returns on investment of more than 70%. You could earn such returns in less than 30 minutes provided your bet on the direction of an underlying asset’s future price is correct. Such returns are unheard of in any other trading ndustry. It is also worth noting that trading binaries is safe so long as you use SEC or CFTC compliant platforms.

Contrary to popular belief, binary options are a safe investment choice. This is true if you use a regulated broker (SEC registered).

Furthermore, they allow an investor to trade a wide range of underlying assets, come with many yes/no proposition variations, and have high risk-reward.

Binary options trading is likely to explode in the near future, thanks to the popularity of internet-enabled mobile devices. Mobile device owners can now download and use apps that allow them to execute binaries transactions from the comfort of their homes or offices.

Furthermore, the rising popularity of cryptocurrencies such as Bitcoin shows that there is huge demand for alternatives to traditional currencies and assets.

Finally, unlike other tradable assets, binaries come with many yes/no variations. Some offer pre-agreed refunds to investors whose contracts expire out of money. For instance, a refund of 5% of a trader’s deposit. Another popular variation involves allowing investors to select multiple possible asset prices in a technique called “ladder.”

For example, a trader could choose four different asset prices and potentially increase the ROI fourfold. The range of yes/no variations is quite wide and it is impossible to cover all in this post.

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