Things about Binary Options Trading You Need to Know

There is one type of trading that you must look deeper into before you decide to put your money in it. Have you ever heard about binary options trading? We will talk about that trading scheme for today’s topic, so you will be able to make your decision.

What is option?

Stock investors typically employ options to hedge their portfolios. Regular options have an underlying asset, such as a stock. An option is a contract to buy or sell an asset, such as a stock, at a specified price and time. This option can be bought or sold.

There are Put Option and Call Option. A put option is a right to sell stock at a specified price. While a call option is the right to buy the stock at a specified price.

What is binary options trading?

Firstly, let’s talk about its definition. Different from regular options, binary options trading is a kind of trading instrument where we can earn money only by guessing or predict the asset price.

How does it work?

Let’s look deeper into the procedure:

  1. User or trader only needs to do registration and put some money as a deposit.
  2. User or trader will choose the asset index, such as currency, stock index, etc.
  3. After that, the user or trader sets and risks certain amount of money.
  4. Then, the platform will calculate the potential profit.
  5. The user or trader is required to guess the price index. They will get profit if their answer is correct and vice versa.

The difference between binary options and other investments is in asset ownership. In other investments like stock, bonds, and mutual funds, we have a ‘real asset’ that we can buy and sell. But in binary options trading, all the traders do is guessing the price without any real transaction.

It is similar to Maysir

Secondly, maysir is gambling and prohibited in Islam. Islamic law states that Muslims should avoid this kind of activity. Binary options trading is similar to maysir because there is no real buying and selling activity, there is only guessing and earning money. Moreover, this kind of trading is prohibited in many countries including Indonesia. It is illegal in Indonesia and there is no official law that regulates it.

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