With the explosion of so called "Binary Options investment firms", I am surprised that there hasn't been much discussion about what exactly these companies are. From my observation, they are basically a kind of on line casino. When Hedge Street opened as one of the first on line binary options platforms, at least they had strike prices (although they were very far apart, and putting on binary options spreads was completely impractical). However, these days, all of the on line binary options trading I see have elimianted strike prices. The current price is referred to as the strike price, if you think it's going up it's called a call and going down is called a put. Is this not a gross misuse of these terms as used in traditional options trading? I have 2 questions. 1) Are there any binary options firms that still have real strike prices as used in traditional options? (Like Hedge Street used to have) 2) What is the advantage to trading binary options as opposed to traditional option spreads, in terms of risk/reward. Am I missing something, or does the binary options industry pray on people with no knowledge of options?
Ig markets has "strike" prices with binary options. they call it ladder. however buy/sell spread is nearly 5% and "options" are daily or hourly. imho one should stay away from this "binary" bucket shops and direct his/her energy to regular option spreads
I used to trade these some years ago with the bucket shops. Made loads of money due to a certain pricing inefficency. One firm banned me after 8 months, don't know why they bothered since the edge had gone and i wasn't no longer trading them anyway!
What do you mean exactly by pricing inefficiencies? Do you mean on the underlying? My impression is that these binary options trading firms are nothing more than online casinos using the underlying assets and the term "options" as a way of fooling people with no financial background into thinking that it's a legitimate investment. The reason I put it in the same category as gambling is that once you open a binary options position, you have to wait until expiration, there's no way to close out or adjust a position (other than openning up another position). Is it possible to put on spreads with the binary option firms that have strike prices (AKA latter?) How far apart are the steps to the ladder?
Maybe we're not talking about the same thing. I was referring to binary bets such as whether or not the Dow would close higher or lower today than yesterday. You could close the bet at any time prior to the close at the prevailing price. Is this what you guys are talking about? If not apologies. edit: there were and are loads of different binaries such as whether the price of X would hit Y or not, which sounds more like what you are talking about.