Binary options are becoming more and more popular among traders, especially among the “novice” traders, because they are a financial instrument that is very easy to understand and use . But what are the advantages and disadvantages of binary options?
Let’s find out together, step by step, starting with the advantages of the Binary Options to end with the Disadvantages of the Binary Options.
Advantages of binary options
Simplicity: this is the main strength of the binary options, because no other financial instrument is so easy to understand and use; in fact with the Binary Options you have only to make a prediction on the movements of the Prices, and you will get the Payout if your prediction was correct or you will lose the money invested if your prediction was wrong.
Possible High Earnings: the binary options are a highly speculative financial instrument, in fact the average Payout in case of correct prediction varies from a minimum of 70% up and over the 500% of the investment made. This means that by investing 100 euro on a Binary Option, you could earn a minimum of 170 euro or even 500 euro and more (The Payout depends on different factors).
Short-term: Binary options are a financial instrument quite “fast”, in fact the Expiry Time for the Binary Options it can be of just 1 minute, up to a maximum of a few days or a week.
Freedom of choice: there are a lot of assets on which you can trade, from Stocks to Indices, commodities and currency pairs, for a total of some hundreds of Assets available(the total number of available Assets vary from Broker to Broker, of course).
“Calculated” Risk: The possible Payout and loss from a Binary Options is already fixed from the beginning, so you will never lose more money than the amount that you have invested in a Binary Option, and you already know your possible earning from a Binary Option.
Disadvantages of binary options
Fixed Earning: If is positive to know how much you will earn before you invest your money on a Binary Option, in case of “strong” movements in Prices is not so positive. Because when there is a strong movement, the Price of the Asset can greatly increase but with the Binary Options the earning is already fixed: it means that in case that the Price of a share of a Company rises from $80 to $90, you will earn the same amount of money in case that the Prices was raised from $80 to $81.
Short-term: the downside is the fact that the Expiry time for the Binary Options is usually very short and if you want to operate for the long-term, that is no possible in most cases. Furthermore, the Prices in the short-term are more subjected to the volatility.
Need to use external programs for charts: the vast majority of online Brokers, unfortunately do not provide “useful” charts for the Traders, to help them to predict the price trends. Usually (apart a few rare cases) the Charts available on the Trading Platform of a Broker, are similar to the Line Chart and they are too “simple” to help the Traders; therefore, you are forced to use other charts from another website or Platform, to be able to study the trends in Prices.