Binary Options

[DailyGainsFitness]

I have a friend that is always making money in new, weird ways. He quit his day job 8 years ago and has had his hand in every possible money making plan you can think of. He's doing well: bought a house, 2 cars, lots of electronics. In other words, he's credible.

 

Anyway, my friend has been talking a lot about binary options. He keeps telling me that if I have a good chart I can make tons of money trading. I've only just begun to look into it and I don't know what to think, which is why I'm asking you guys. What do you think? Do any of you know anything about binary options?

[Sam Ashen]

Um.......

 

Okay.....

 

First question:  Do you know anything about options?

 

EDIT:  Okay.  I dug a little deeper and found an article.  Here is the investopedia article.  And the Wikipedia article.  Why they call it an "option" I have no idea.  The only reason I can think of is it trades like an option.  A more accurate name would be "bet."  Binary is 1 or 0.  Either it is worth "1" hundred or "0" hundred.  Either your proposition wins or it loses.  It is just like a bet.  Either you win the bet or you lose the bet.

 

In my opinion, this is yet another game where the house always wins.  The house always freaking wins.  My analogies are:

 

Let's say we bet on a coin flip, heads or tails.  You pay 52.  If you win, you get 100.  If you lose, you get 0.  Would you play?

 

Let's say we bet on a six-sided die roll.  You pay 20.  If you win, you get 100.  If you lose you get 0.  Would you play?

 

You would be betting that whoever is out there setting the bid and ask prices is wrong about the odds.  Speaking of bid and ask prices, what percentage is the bid ask spread of the average?  That would be (a-b)/(a+ and that number is pretty high.

 

 

 

Anyway, my friend has been talking a lot about binary options. He keeps telling me that if I have a good chart I can make tons of money trading.

 

 

This is a very dumb question, but did he say if you have a good chart, you can make tons of money trading binary options?

 

 

 

He quit his day job 8 years ago and has had his hand in every possible money making plan you can think of.

 

 

What did he have when he quit his day job 8 years ago?

 

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Length post.  Sorry.  Going back.

 

Let's say "they" are wrong about the odds and you have a two point advantage.  You are paying 48 for a 50% chance to win.  In order to win 1K, you have to bet 24K every day.  50% of the time you are ahead 26K.  50% of the time, you are behind 24K.  One week out of 32, you will lose 5 times in a row to the tune of 120K.  If you double that, then losing ten in a row is a once every 20 year event.

 

TLDR:  Look at the bid-ask spread.

[DailyGainsFitness]

My friend is just starting to get into binary options. But, like I said, he's usually great at making money. He made his money initially doing MLM and affiliate marketing. 

 

I know quite a bit about stocks and trading and all that. I was just looking for anyone that has experience with binary options. Trading has similarities to gambling and, by some definitions, it is quite literally gambling. But there are plenty of ways to swing the odds in your favor.

 

As my friend explained to me, you come up with a chart and you place your trades based on your projections. If you do it right, you "win" between 70 and 80 percent of the time.

 

I've done some preliminary research into binaries, and I can't make up my mind if I want to pursue it further. I was just throwing it out there to see if anyone here had an experience with them. 

 

Oh yeah, thanks for the response!

[Sam Ashen]

No experience with binary options here.  Sorry.

 

Standardized options, yes.  Buying Calls and Puts.  Selling Covered Calls.  It looks clever until one day I look pretty bone-headed.  I have not done spreads and certainly not selling uncovered options.  Generally it has ended up slowing down my rate of return.  The last time I really checked, the difference was the commissions plus the spreads.

 

On the other hand, a very timely collar saved me when the market really came apart in late 2008.