Forex industry is not only thrive on technology advances and human's competitive nature, but also controversy. One example is cryptocurrency such as bitcoin, litecoin, etc which spread like a wildfire since its appearance a few years ago. Another controversial issue is binary option.

Forex industry is not only thrive on technology advances and human's competitive nature, but also controversy. One example is cryptocurrency such as bitcoin, litecoin, etc which spread like a wildfire since its appearance a few years ago. Another controversial issue is binary option.

binary options trading

 

Binary Option = Profitable + Risky

Binary option refers to a kind of option contract where the payoff is either a certain amount of money or nothing at all. In practice, someone who trades binary option pays a certain amount of money to binary option broker, and makes prediction about price changes within a specific period. The contract can not be cancelled or transferred before reaching full maturity. If the prediction is right, then a certain amount of money that has been agreed beforehand will be received by the trader. Or else, the money that has been used to purchase the contract will be deducted permanently from his account. Sometimes, a certain portion of refunds will be given, but that is not compulsory, and the broker definitely will not return 100% of the money either.

It sounds gamble-y, doesn't it!?

In fact, the main objection from the populace in the topic of binary option is that it sounds too much like a gamble. Although binary option brokers commonly promote contracts on currency pairs, the more conservative forex traders tend to avoid it like the plague. The more progressive ones obviously take the opposite side. They reasoned the contracts intrinsically still based on currency price movements and forex analysis could be applied to binary option trading in a simpler arrangement. Therefore, trading binary option is considered as more profitable than the ordinary forex.

 

Binary Option Is Not Suitable For Everyone

Another concern in regard of binary option trading is that there are too many unknown entities in the market that offer binary option trading. Sometimes they are even disguised themselves as investment company, and cheated money out of those who are new in financial investment. Concern on this matter is what brought Belgium Financial Services and Markets Authority (FSMA) to warn the public about binary options.

Late last week (2/5), FSMA issued warning about the significant risk of investing in binary options. FSMA asserted that binary options are only for those who are already familiar with derivative financial products, really wish to speculate, and ready to lose the invested money. The chance of losing one's entire investment, said FSMA, is greater than the prospect of earning money.

However, FSMA does not forbid binary options, and even referred to the fact that there are investment firms or credit institutions authorized to sell binary options in Belgium.

At least three financial market regulators in other countries have also been taking similar stance in regard of binary option trading. In January, France's AMF warned the public of dozens binary option websites that was unregulated to sell binary option in France. Italian CONSOB for more than a year have been interchangeably giving out license for and warns against binary option brokers. Cyprus' CySec have also been granting license while regularly updating investors on binary option brokers that claims to be located in its jurisdiction but held no such license. The common official objection seems to be the authorization status of binary option broker, instead of the scheme itself.

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