While binary options trading can be a very potentially lucrative investment opportunity, as with all all forms of investment they do carry risk that you need to be aware of.
1. The first and probably the single most important one for you to be aware of is one you probably already know. And that is the stock market is very volatile. If your retirement account has taken any hits lately you probably notices this.
Anything can affect the direction that it goes. With the recent downgrade of the credit rating of the USA, to whatever military conflict erupts the interconnected global village can bring havoc into any trading portfolio. Remember Murphy’s Law that whatever can go wrong will go wrong. You can name any type of negative event that can happen and the market can go haywire.
2. Binary options can not be exercised until expiry. In other words you’re getting into a trade you can’t get out of. On the other hand though with binary options your losses are limited to the investment and there are no margin calls. And some brokers will give a 15% refund on a losing trade.
3. Another risk in binary options trading is the number of decimal points involved. A vanilla option has two decimal points where a binary option can have to four. So if your trade ends up with 0.0001 away from being a winning trade you lose.
4. A fixed rate of profit. While 71% profit is a few light years better than what you’ll get with bonds these days vanilla options have the potential for triple digit profits. This does have an advantage over taking a second job though. Because if you invest $100 in a trade and you win you get $71. What part time job pays you $71 an hour.
Not trying to scare you away from getting involved with binary options trading as there is real potential for profits. It’s simply that with the right knowledge and an awareness of the risk involved you can make better informed decisions as to what you are getting involved in.
While there is clear and obvious risk in binary options trading if you choose this as an investment vehicle you are well aware of the risk that you are getting into. Other forms of investment often try to downplay the risk which can leave you in shock should something not go the way you anticipated.