I know that when it comes to investing, I am as boring as it gets. I follow a buy and hold strategy that has worked out very well for myself since I began investing. Heck, I even detail to readers about how to become a stock market millionaire. But lately I’ve been hearing more and more about binary options. What the heck are binary options you ask? That’s the question I asked and did some research. The following is what I found out about them and whether or not I plan to introduce them into my investing strategy.
Binary Options Explained
In a nutshell, binary options are bets on where a trader thinks a stock or commodity will be trading at. I’ll give an example to make it clear: Let’s say I offer you a scenario that says Tesla stock will be higher than $300 per share at 3pm today. With this bet, I am promising an 80% payout rate.
If you choose to buy into this contract for $100 and are correct (that Tesla is trading above $300 at 3pm today), you make $180. This is the $100 you bet plus the 80% payout that I promised. If the payout I promised was 90%, then you would walk away with $190 if you were correct.