Binary options trading, as we know is the new kid on the block of the financial markets. Much simpler and easier to understand and trade, the binary options have taken the trading fraternity by a storm. Eyeing the profits of the seasoned traders made out of binary options trading, even the new traders are opening up accounts with the online trading platforms, which allow binary trading. Therefore, there is a sudden rush of traders and investors along with the mushrooming of the trading platforms, who are in a bid to capitalize on this popularity.
Those who are new to binary options and its working can understand the concept this way. Binary options are actually contracts between the buyer and the seller, where the buyer buys the option on the anticipation of the price movement of the underlying asset. Since there are many assets to choose, the trader chooses an asset and anticipates whether the price of the chosen asset would fall or rise in the future. If his anticipation is correct after the said expiry time, he gets a predetermined payout from the seller. However, if his anticipation is incorrect, he does not get anything. Therefore, being simple to understand, binary options has gained immense popularity among the investors.
However, the thing that is a little disturbing for some traders is that is binary options gambling. Since traders have to anticipate whether the price would rise or fall within a certain period, it is akin to gambling as on a roulette table where players put in their money on the numbered chips. Once the expiry time is over, the trader either gets the predetermined payout, which can be as high as 75% or lose his investment. Therefore, some traders compare binary options trading to gambling and a shortcut to making quick money. In addition to this, the binary options are exempted from paying capital gains tax or stamp duty on the pretext that it is gambling. If one analyzes this face of the coin, he would assume binary options trading to be gambling. However, there is a need to look at the other side of the coin as well.
Binary options for serious traders is akin to business. They conduct fundamental and technical research using several tools for the purpose. This enables them to understand the market and its impact on the underlying assets. They study the factors, which may bring about a change in the price of the asset. Therefore, they take binary options trading as a business, which requires commitment and diligence. These serious traders do not only go by the word of the broker but also conduct research on their end to be sure of their anticipations.
Therefore, binary options can be considered gambling for the day traders who look for making quick money. However, fundamentally binary options trading is not gambling, as it requires one to conduct research and then invest. There are risks associated with trading binary options. Hence, they must not be considered a get-rich-quick scheme.