We’re recently getting more and more contracts for coding binary option strategies. Which gives ordersend slippage in forex a slightly bad conscience, since those options are widely understood as a scheme to separate naive traders from their money.
And their brokers make indeed no good impression at first look. Some are regulated in Cyprus under a fake address, others are not regulated at all. Binary options, in their most common form, are very different to real options. They are a bet that the price of an asset will rise or fall within a given time frame. If you lose, you pay the stake minus a possible loss payout. However this conclusion is a fallacy. It can in fact be of advantage for the broker to offer a payout that allows you to win, as long as most other traders still lose.
A broker has not the freedom of arbitrarily reducing the payout. But why would you want to trade binary options anyway, when you also can trade serious instruments instead? But aside from tax advantages in some countries, there is one single compelling reason that might make a binary options trading experiment worthwhile. Profit and trading cost of a binary option are independent of the time frame. So you can trade on very short time frames, which would be difficult, if not impossible with real options or other financial instruments. So, smaller trading costs on low time frames are the obvious benefit of trading binary options.