Eli5: How does binary option stocks work? Also binary option fraud? Like why is it getting banned? What makes it worse than regular stock purchasing?

Question

From what I understand it’s kind of like placing bets on stocks?

In: Economics

Answer 1

Yeah it’s basically gambling and not actual trading, that’s why it’s getting banned. Especially because the “house always wins” in the long term.

Binary means you either win or lose. You don’t own any assets, you don’t get paid proportional to the course change, you just get paid a fixed amount based on wether your prediction comes true or not.

And the one who sells those bets can guarantee they make profit by selling opposite bets that each pay less than the total income to the winner.

I.E. you pay $1000 to place a bet on rising stocks and promise you $1750. Someone else gets the same bet on falling stocks. So whatever happens they make $250