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A unique form of investment option, binary options have recently come under scrutiny by the Financial Industry Regulatory Authority FINRA for potential increased risk of fraud.
The potential for fraud does not mean binary options are unsuitable for everyone, but investors should be aware of all their advantages and disadvantages. Developing an understanding of all investment opportunities prior to investing can minimize the risk of fraud and help investors make fully informed decisions.
Binary options are so-called because upon the expiry of a specified period of time, the option either makes a pre-determined amount of money or nothing at all meaning the investment is lost. They provide investment access to stocks, indices, commodities, and foreign exchange. This is true regardless of how much the instrument actually moved.
If the trader is incorrect on predicting the direction of the market, the investment is lost. In order to make money, the price must be above the strike price at the time of the expiry of the option. One of the greatest advantages of binary options is that the risk and reward are known up front, before the purchase is made.
This means that a trader can be correct on the market direction by a very small margin and still succeed on the investment. Another advantage is purchasing binary options are very simple as they only involve one decision: The major disadvantage of binary options is that the trader must be correct a fairly high percentage of the time in order to make money.
This is because the rate of return is fixed. For example, a trader purchases an option thinking the underlying asset will increase in value, which it does.
It does not matter how far above the strike price the underlying asset increased to in terms of the rate of return enjoyed by the trader. This means that there is no possibility of one large successful option purchase offsetting a number of unsuccessful purchases that result in losses.
If you would like more information about legal issues related to investments, contact an experienced securities law attorney today. At the Silver Law Group , we help investors pursue recovery from stockbrokers and other investment professionals who have committed misconduct.
Silver Law Group Home. Contact Silver Law Group. Securities Arbitration Attorneys Our FINRA arbitration lawyers work with investors to recover losses caused by securities fraud, investment fraud, and other kinds of stockbroker misconduct.
What are Binary Options? Advantages and Disadvantages One of the greatest advantages of binary options is that the risk and reward are known up front, before the purchase is made. Helping Investors If you would like more information about legal issues related to investments, contact an experienced securities law attorney today.
Contact Us Free Consultation Silver Law Group and Scott Silver aggressively pursued their losses until he got their money back. Scott Silver zealously handled the matter, recovering my losses. Silver Law Group guided me through the arbitration process and a mediation, always fully prepared and committed to my case. Main Office W Sample Rd. Florida Office Technology Way We serve clients nationwide including, but not limited to, those in the following localities: Petersburg, and Washington, D.
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