Binary option: Difference between revisions

Revision as of 22:15, 14 September 2022

Revision as of 01:38, 27 September 2022

Line 29:

On non-regulated platforms, client money is not necessarily kept in a trust account, as required by government [[financial regulation]], and transactions are not monitored by third parties in order to ensure fair play.<ref>{{Cite web |url=https://www.fma.gv.at/download.php?d=2747 |title=FMA Focus Binary Options and CFDs |publisher=[[Financial Market Authority (Austria)]] |format=PDF |access-date=4 May 2018}}</ref>

Binary options are often considered a form of gambling rather than investment because of their negative cumulative payout (the brokers have an edge over the investor) and because they are advertised as requiring little or no knowledge of the markets. [[Gordon Pape]], writing in [[Forbes]].com in 2010, called binary options websites "gambling sites, pure and simple", and said "this sort of thing can quickly become addictive... no one, no matter how knowledgeable, can consistently predict what a stock or commodity will do within a short time frame".<ref name="Forbes" />

Pape observed that binary options are poor from a gambling standpoint as well because of the excessive "house edge". One online binary options site paid $71 for each successful $100 trade. "If you lose, you get back $15. Let's say you make 1,000 "trades" and win 545 of them. Your profit is $38,695. But your 455 losses will cost you $38,675. In other words, you must win 54.5% of the time just to break even".<ref name="Forbes">{{Cite news |last= Pape |first= Gordon |title= Don't Gamble On Binary Options |url= https://www.forbes.com/sites/investor/2010/07/27/dont-gamble-on-binary-options/ |work= Forbes.com |date= 27 July 2010 |access-date= 4 May 2018