Whether Binary Options are gambling is a question asked far and wide. A question asked by traders, brokers, regulators, and other parties interested in binary options. So let’s settle this once and for all, binary options ARE gambling. However, before you start picturing flashy lights and playing cards, let me further explain what this means.
First, let’s take a look at the definition of “gamble” as defined by Merriam-Webster:
1. Something that could produce a desired result or a bad or unpleasant result
a : an act having an element of risk
b : something chancy
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2. The playing of a game of chance for stakes
Are All Investments A Gamble?
Judging by this definition, a lot of what we do in daily life is gambling. Let’s focus on finance. What do you think, dear reader, a stock trader does when compiling a portfolio? He risks a certain amount of money for an outcome that is not guaranteed. That, by definition, is gambling. What about Forex? The same story. Let’s take a broader investment, real estate. People buy land, houses (usually mortgaged) with the hope that the property value would rise, and they could sell it for a profit, or at the least break even. Would you say there is no risk in that? 2008 (USA) would disagree if you did, yet real estate was considered a “safe” investment before the crash. Very few would call real estate investment gambling, but by definition that’s exactly what it is, and history proves it.
Let’s be honest, any investment activity is gambling. Venture capitalists also gamble when they invest into start-ups, there is no guarantee that the company will survive let alone bloom. Anyone offering guaranteed earnings or profit usually get locked up behind bars at one point or another. Especially if they add to that claim that there is absolutely no risk involved.
What you need to do as a smart investor/gambler, and what many do, is to manage and mitigate your risk. The risk will always be there and the higher the payouts the riskier the investment vehicle is. With binary options, the payouts are high but the risk is fixed. You will never lose more than what you’ve invested in one position. This is actually similar to bank deposits, you invest a certain amount of money, you may be protected up to a certain sum depending on your government, and the bank offers you a fixed annual percentage. However, with banks since the risk is relatively low so is the payout on those savings accounts. In most cases the payout doesn’t even cover inflation.
Binary options are gambling much like other financial instruments, tangible or intangible. This is not a bad thing, people gamble their entire lives. What we learn as a result of survival is knowing what we are risking and for what result and on what odds, this is something you must do in personal finance as well if you want results. There are successful equities traders, Forex traders, binary options traders, venture capitalists and even poker players, it is all about the approach. So take this information and become a successful investor.