Binary Options & An ICO That Gives The House Advantage
Today we explore the ups and downs of the binary options trading world and how binary.com plans to allow users to participate in binary trading, but from a very different angle. Let’s jump in!
THE INTERSECTION WHERE BINARY OPTIONS AND THE BLOCKCHAIN MEET
The crypto space is being flooded with new tokens each day. When a token fluctuates to the upside, a token has the ability to make an early adopter crypto rich. To put it mildly, the ICO market is in a state of frenzy with unparalleled growth… Well, almost unparalleled.
Before cryptocurrency took the world by storm, another financial tool was quickly gaining popularity, it’s called a binary option.
A binary option, like those traded on binary.com, are financial options with a fixed expiration date in which the outcome is either a win or a loss. High payouts of 70% – 80% on most contracts, is what makes binary options trading so popular with speculators, predictors, investors and now even the crypto community, who have earned a reputation (for better or worse) for being unimpressed with single digit or low double digit returns.
Binary options go by a few different names including; all-or-nothing options, digital options, fixed return options (FROs) or fixed odds trading. Let’s look a little deeper into the upsides and the downsides.
RIDING THE UPS AND DOWNS
Binary options have some interesting upsides, but buyers need to be aware of the downsides as well. As was stated earlier in our interview with the team at Binary.com (who are actually currently doing an ICO), the option is “all or nothing”. This creates a very different dynamic than other forms of investment, because although there is huge upside, there is also the potential of walking away with nothing.
This is very different than many traditional forms of investing. For example, if you invest in a stock or commodity with the hopes of it going up, and you’re wrong, you’re not left with nothing. You own the stock or commodity and you can sell it back to the market at a loss. So although you didn’t win, you didn’t lose everything.
However, stocks and commodities tend not to offer huge payouts in the short term. Investing in a stock or commodity in the short term likely won’t present itself with the opportunity to payout 70% – 80% on each play. With traditional equities, making 5% at the end of the day would be cause for celebration. Maybe even a bottle of champagne. However, in the world of binary trading, 5% gains are not what most traders are looking for.
With binary options you’re almost guaranteed big payouts of 70% – 80% each and every time you click the buy button. And while you’ll never lose more than you put it, if you’re wrong, you’re going to lose it all.
With traditional equities and commodities, if you’re wrong, you can sell the asset back to the market at a loss because you’ve actually purchased the asset. For example, If you’re bullish and buy gold today at $1280 on a traditional commodities market, and it goes down to $1270 tomorrow, you lose. It will feel terrible, but you only lost $10. So you’re protected on the downside. Plus you don’t have to sell if you don’t want. There is no expiration date. You tell yourself “maybe it will bounce back”. With binary options the expiration date forces a decision.You are either right or wrong at the contract’s expiration time. There are no “maybes”.
However, we need to look at this dynamic from another perspective as well. With traditional equities and commodities, investors are also limited on the upside. Gold isn’t going to jump 80% by tomorrow. So investors are playing with a narrow gradient of success as well.
Binary options on the other hand, have a much wider gradient on both ends, for both success and failure. In short, traders have substantially more upside, but also the potential for more downside.
A PREDICTION TOOL THAT SHOULDN’T BE USED A GUESSING TOOL
The interesting thing about binary options trading is that, although they seem easy to use on the surface, a lot of information is actually “baked in” to the decision. People who use platforms like Binary.com to guess are going to lose, The odds are against them. People who succeed in binary trading are level headed traders who are often expert technical analysts.
Beyond that, the ideal user demographic will also generally enjoy the possibility of trading the very short trading windows (1 minute, 5 minutes, 15 minutes and 1 hour). So while many investors would run away from short time frames, sighting concerns over difficulty separating signal from noise, other investors who prefer to be active in daily trading, tend to love the format. It’s not a passive form of investing. It’s incredibly engaging. It’s difficult to pull your eyes from the computer screen. To put it bluntly, it’s highly addictive.
BINARY IN THE ICO SPACE
So how does this all fit into the crypto space? Well, in a recent interview we had the opportunity to chat with the team at Binary.com about their upcoming ICO. Essentially, their ICO puts forth a pretty interesting proposition to the cypto community which allows token holders to get involved with binary options, but from the advantage of “the house”.
And while holding a token in order to collect dividends may seem a little bit less sexy than 80% payouts, you might find yourself a bit more protected from the downside. In binary options trading, theoretically, the house will never lose (that’s the goal of course). If Binary.com was designed to lose, or they were not good at what they do, they wouldn’t have been around since the year 2000. They truth is, in binary options trading, the house has an edge, and with binary.com offering an ICO it allows participants to ride this edge. Now, the ICO doesn’t come without risk. I encourage you to read their whitepaper which thoroughly outlines what many of these risks are. Binary.com has done an incredible job of being total transparent about the entire process, and unlike many other players in the ICO space, Binary.com has a proven track record of success. They are not some fly by night operation.
It will be interesting to see where this ICO goes. I encourage our readers to check out our interview with Binary.com and head over to their ICO website to learn more about their offering.
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