Perhaps this is the question that prompted you to buy this book, and I hope I have managed to answer it for you. Throughout this book, I have tried to provide a balanced and objective view of the binary options world as it is at present. As the tagline of the book suggests, there are the good, the bad and the down right dangerous, which I think neatly sums up the world of binaries. As with anything new, there will always be those out to make a quick return, and to take advantage of the unwary or ill-informed.
And my objective in writing this book has been to try and inform and educate. There are many good things in the world of binary options, but there are also many not so good things. At present this market is at an embryonic stage. Legislation will come, and come quickly as the regulators seek to protect the public. Whilst this is a good thing, it is only part of the solution, since this simply drives the less scrupulous into unregulated jurisdictions.
However, as binary option traders become more educated and competition grows, this market will mature in much the same way as is happening in the world of spot forex. In many ways it is very sad the good always get tarnished by the bad. Companies such as Binary.com, Nadex, IG Index, and of course the exchanges, stand head and shoulders above the rest. With these companies you will find integrity, security, opportunity and creativity in equal measure. The products offered have validity and authenticity.
At present, the question that is perhaps vexing the authorities more than any other, and is also the focus of many conversations in the chat rooms and forums is simply this. Are binary options betting or trading? And here let me give you my thoughts.Perhaps the starting point is the CBOE. The CBOE is akin to the CME, CBOT, the NYSE and other major exchanges, and the mere fact that binary options are listed, places this instrument fairly and squarely in the trading world. It is impossible to argue otherwise.
The same is true of Nadex. Here again, we have an exchange, albeit one where you can become a member with a ‘seat’ on the exchange for just $100. Not something you could ever buy on the CBOE or CME. Both offer binary options, and as with any other exchange traded instrument, it is the financial chart and market analysis which underpins the buying or selling decision.The debate then becomes one centered on off exchange offerings. Are these instrument betting or trading? And this is not an easy question to answer.
Betting:If we start with the casino, this is a fixed odds proposition, but with no underlying market. There is no analysis we can undertake, other than to study the mathematics and probability of chance. Next comes sports betting, and perhaps horse racing is a good example. Whilst a horse race does not have an underlying market, what it does have is a level for analysis, and that of course is the horse itself.
Here we now have something to study, namely the form of the horse, which is reflected in the odds being quoted. And one could argue that if we are prepared to study the form of the horse in depth, and compare this with the going, the conditions, the length of the race and the course itself, all things being equal we are basing our decision on sound analysis.
And perhaps it is not so far fetched to suggest horse racing may be a ‘better bet’, if we are prepared to put in the work and study the form. But then so do the bookmakers, which is how the odds are derived.Next comes spread betting which introduced the word betting into the trading lexicon. This instrument covers every market from financial to sports, having been introduced originally for trading gold. CFDs are a further example in this category.My own thoughts are as follows, and follow two very distinct paths.
First, if the proposition I am considering has some underlying scope for analysis, it moves up the scale from outright betting to speculation, and ultimately into investing and trading. Second, it is perhaps time which is the defining factor. Consider two examples from the same market with the only difference being time:
The EUR/USD being higher than 1.2820 in 60 seconds
The EUR/USD being higher than 1.2820 in 4 hours
The proposition is the same. The market is the same, and the underlying analysis would be the same. The only difference is time. Why then is the first considered to be betting, and the second to be trading? And ultimately it does all boil down to time.Time is a wasting asset, and one we have to have on our side. The time to be right. Outside of the world of options, we can afford to be patient, provided we have sufficiently deep pockets and wide stop loss orders. In the world of options, we are constantly considering time. For a binary option, time can be both a friend and an enemy. In binary options we need time on our side. Time for the outcome to occur, and 60 seconds is simply insufficient in this respect.