“If you invest nothing, the reward is worth little.” – Richelle E. Goodrich
Are you interested in financial options trading as a means to supplement your retirement income? Or perhaps you are considering trading in binary options as a way to pay your way through college. There are many reasons why you could be looking at online options trading. It does not matter what your reasons are, the only thing that matters is that you are investigating a viable option that will help you increase your savings, pay off debt faster, grow your retirement investment portfolio, or save for a special occasion such as a holiday abroad.
Rosie Barnes in her article titled “The Remarkable Rise of Binary Options” notes that “the rise of binary options in recent years has been nothing short of remarkable.” She goes on to say that seven years ago binary options trading was considered a form of gambling and that the industry was regarded as a “financial wild west” and it would be just a matter of time before global financial regulators closed down the binary options trading industry.
We are now seven years down the line, and not only has the options trading industry not been closed down, but they are also still doing great business and are growing from strength to strength.
What is binary options trading?
Before we take a closer look at why financial options trading is not gambling or even similar to gambling, let’s have a look at a very specific definition of binary options trading. This will help us understand why gambling and financial options investment do not belong in the same sentence.
By way of a brief explanation, binary options trading is an investment vehicle where the “payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money.” You do not buy or sell shares on a traditional stock exchange; you trade on whether you think the price of the underlying asset will move up or down. The reason why this option is known as a binary option is that there are only one of two results when you place a trade.
For example: If you think that the price will increase and it does within the time frame of your trade, the answer is “yes”, and you have made a successful investment. On the other hand, if you determine that the price will decrease between the opening and closing times of your trade, and it increases, the answer will be “no”; ergo, your investment was unsuccessful.
Binary options vs gambling
The yes/no nature of binary options trading can make it sound similar to gambling. Furthermore, the biggest part of the conundrum is that global financial regulators do not know whether to classify binary options as a financial market trading vehicle or as gambling.
To make an informed decision, we need to look at the dictionary definition of the word “gambling”. Ergo, Wikipedia states that gambling is the “wagering of money or something of value (referred to as “the stakes”) on an event with an uncertain outcome with the primary intent of winning money or material goods.”
On the hand, binary options trading does seem to have an element of chance or risk involved. However, the biggest difference is that to trade successfully in binary options; you need to study charts and graphs such as Oscillators and Momentum Indicators for each of the underlying assets that you which to invest in. These technical indicators show price movement history, and they forecast future trends for each specific asset. Your decision on whether to trade on the fact that the price will move up or down within a specified time frame should be based on information gained from the statistical charts and graphs mentioned above.
Based on the above, we can conclude that trading in binary options, when approached professionally, cannot be considered gambling. It is a fast-paced, higher risk-based financial market trading vehicle.
Furthermore, by way of a final postscript to this article, one of the most important elements to take into account when considering binary options trading, is to ensure that you partner with a reputable online investment broker. A company like Lionexo make it their mission to make sure that you trade as successfully as possible. Therefore, they will offer reliable, helpful investment advice, and they will provide you with the necessary technical indicators to help you make the right investment decisions.