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Published On: Thu, Nov 29th, 2012

Binary Options as Gambling

Compared to other forms of trading, binary options are a recent introduction into the world of investment. As they were specially constructed to be easy-to-use, they quickly gained the attention of investors. However, some of their intrinsic features have caused many experts to classify them as just another form of gambling. Is this image warranted? To gain a rational answer to this query, a short introduction to the benefits of binary options is needed and will now be provided.

Binary options possess a predetermined payout and refund structure.  You will therefore know exactly the size of your expected profits and rebates even before your positions are opened. Consequently, you will be able to assess your risk exposure per binary option with accuracy because this trading method presents you with an inherent and well-proven risk and money management strategy. No other investment type on the market today provides you with such facilities.

Binary options offer you the chance to initiate large trading positions in underlying assets using just a minimum cash layout.  You also only need to concentrate on predicting just the direction in which price will advance and not the magnitude of its movements. Therefore, you will discover that trading binary options is far simply than other types of investment, such as trading stocks directly.

Using your broker’s state-of- the-art mobile and internet trading platforms, you will be able to respond rapidly to all new global and trading events by instigating new binary options immediately and with accuracy. This attribute implies that within just short time periods, you have the thrilling prospect to gain returns of 85% of your wager. Now, you must be getting excited!

Your binary options trading decisions could hardly be any more straightforward as you only have to choose in which direction the price of your underlying asset will move, i.e. either up or down. Therefore, you are not required to perform detailed due diligence or assess complex financial reports in order to predict the magnitude or size of price movements.

However, this last attribute produces a problem because investors just have to forecast whether price will climb or fall within a specified time period. Consequently, many analysts view binary options trading in a similar light as gambling on roulette when you bet on either red or black. In an identical way to when the roulette ball comes to rest, investors are either in-the-money or out-of-the-money at expiration when they trade binary options.

Hence, binary options have attained an image as a potential gambling source to instant riches.  In fact, binary option trading does not even incur any taxation because the Inland Revenue even considers it to be a type of gambling. However, this is a very risky mentality to acquire because you need a win-to-loss ratio of almost 60% in order to just breakeven. Unfortunately, many beginners possess gambling instincts which they have assimilated from activities such as casino gambling. They mistakenly believe that they can easily relocate their gambling ways from those pursuits simply across to binary options.

Some even consider that binary option trading is an easier form of gambling as it does not involve complexities such as unforeseen events, etc. However, if you possess such a mentality then you must eliminate it quickly otherwise you will endure serious fiscal losses when trading binary options. This is because although they may seem to be a straightforward two-way wager, they do, in fact, harbor numerous intricacies.

In comparison, experts perform in-depth technical and fundamental analysis using state-of-the-art equipment in order to devise and test well-developed trading strategies. Professionals, who earn worthwhile incomes from trading binary options, view this activity as a serious business by always exerting total commitment and dedication.

You may well have been enticed by the gambling prospects of binary options trading as it presents the opportunities to acquire as much as 85% of your wager in a matter of minutes. However, you must realize that the probabilities over the long haul are definitely not in your favor. This is because you will only collect 75%-80% when in-the-money but will lose 85%-90% when out-of-the-money. This important feature of binary option trading means that gambling will only produce serious loses over an extensive length of time. In contrast, you really need professional strategies and techniques to guarantee that you can earn a worthwhile and reliable income on a consistent basis.

 

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

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