The whole truth about options

Recently, all social networks and the Internet are clogged with binary options advertising. It is possible that you have already thought about investing your hard-earned money in order to earn quick easy money. The whole truth about options or the secrets of binary options from the nouveau riche.

Hello. You have already seen ads for binary options and you may have considered investing your money. Wait - read my article and think again.

Today I will tell you the obvious things about binary options, which neither you nor the clients of the firms you know, unfortunately, know.

In order for you to understand the irony of deception and feel the drama of turning such a promising tool as an option into nonsense for schoolchildren, let's start with an amazing story about how companies came up with ways to protect themselves from risks in the production and sale of goods.

There is such a thing called risk hedging.

This is when there is a company producing a physical product and it insures itself with the help of various exchange instruments, in our case, let's take an American agro-holding that produces wheat as an example. So, over the period of time from sowing to the transfer of certain volumes of finished goods to the buyer, this agro-holding of ours is fraught with a lot of risks.

That is, no one knows whether it will grow or not, and if it grows, whether it will be possible to sell the entire volume at the price you need, which includes costs + profit.

There are a lot of macro-environmental factors that affect the karma of this agro-holding, ranging from weather conditions in the future to the karma of their competitor on the other side of the world.

This is where futures contracts come into play (future is the future). These contracts impose an obligation on the parties to the contract to sell and buy at the current market price (on the day the contract is concluded) a certain amount of goods on a specified date in the future.

The current market price is when your wheat has not yet grown, but the price that it has now suits you. And here the most interesting begins.

No one cares what the price will be at the time of the transaction, the exchange monitors compliance with the contract.

If the price turns out to be lower than that in the futures contract (current) - the agro-holding is simply a winner in life, because it sold the goods at its own price, which suits it and is higher than the current market price (the market price, respectively, is lower).

If the market price for a product turns out to be higher than that in the futures contract, the buyer of the product (trader-speculator) will be the winner in life, since he will immediately push it to another more expensive one (end consumer), and earn on the difference.

As we can see, futures contracts allow manufacturing companies to receive their rate of return regardless of price fluctuations, due to this, companies do not go bankrupt and the economy develops.

It is worth noting that futures contracts can be deliverable and non-deliverable - it depends on whether you, a trader, will bring 100 tons of wheat to your house or not. As a rule, no.

There are also forward contracts - this is when the delivery date is clear, and the price is on the day of delivery.

The two things they have in common are an obligation to make an agreed transaction on agreed terms, and both of these contracts are derivatives. Derivatives are financial derivatives of a physical commodity.

An option is another tool for hedging risks, which is used to purchase not only physical goods, but also derivatives (these are not all options for using options - but enough for presentation).

So, an option is a right, but not an obligation to buy and sell an asset embodied in this contract before the expiration date. After the expiration date, the option expires. The highlight of the option is that the asset can be not only wheat, but also the futures for it. The figure of the agreed purchase and sale is the strike price.

How it works. A trader-speculator in a suit comes to the agro-holding and says:

Let's give you an option on wheat. At the moment, the price of wheat, let's say 500 - let's take this price. We will agree on the volume of goods and set the expiration time. And for the fact that I give you the opportunity to hedge your risks with the help of an option and, accordingly, take the risks into my own pocket - you give me a commission (say 10% of the transaction). The agricultural holding immediately unfastened the commission and went to grow wheat.

A trader-speculator who issued an option to an agro-holding expects that the agro-holding will not exercise its right to sell him the agreed volume of raw materials (because the price will rise and will not be profitable).

Agro-holding, on the other hand, simply hedges its risks.

And tomorrow is expiration (the day the option expires). The agricultural holding has the right to sell the volume of wheat at 500, the trader has the obligation to buy (the exchange monitors).

What does the agricultural holding do? He looks at the current market price for his product. If the price is higher than specified in the option, then the holding does nothing (does not use its right to sell), the option expires - everyone is happy: the holding sells wheat at a higher price to another person; the trader has his own 10% commission from the transaction, which he received when concluding the option.

If the price of a product has fallen, the agro-holding uses its right to sell the product and sells the product to the trader at a price that is stipulated in the contract and is now more expensive than the market price (for example, it was agreed at 500, and the market price is now 400. The trader is obliged to buy for his hard-earned money).

In practice, producers and miners of raw materials around the world apply for consulting services to hedge offices, so that they make up a complex of hedging instruments that allow the client to sell the entire volume of raw materials within a specified period at a price that suits him.

As you can see, an option is an instrument that is extremely profitable if the price changes in a short period of time.

In fact, options and futures are wonderful instruments, but to deal with them normally, you need a deposit of at least $ 100,000 and only with a broker with an NFA license (America).

Now you know what options are. But online advertising stubbornly tells you about some cool binary options.

Binary options are a kind of derivative instrument from an option. In essence: an option is butter, and a binary option is just a margarine wrapper.

If you call the office of the NFA (American exchange regulator) and ask what binary options are, no one will give you an answer, because people don’t know what kind of shit it is. It does not exist in the civilized world.

The domestic market is full of different offices.

Today we will consider such a sharashka as ** Option.

You know what original options are and how they work, and therefore the first rule: you see some kind of prefix opposite the word option (binary or turbo) - run without looking back.

** Option is quickly gaining momentum due to special advertising (more on that later) and simplicity for an audience that does not want to bother.

The irony is that since this office is not a broker, but a disguised casino, it is not correct to analyze it as a broker, but some points are worth attention:

0) When you enter the site, a logo appears and holds you for 5-6 seconds - like something serious is loading. People are being led. And this is just a line in the site code aimed at increasing sales.

1) They are very proud that they have their own platform. If they bought a license for normal options trading platforms, there would be so much incomprehensible nonsense that sooner or later the user would start asking questions.

Their platform has only 2 buttons: buy and sell - one-armed bandit.

The graph that they show on the screen is not possible to see in the context of, say, a week or a month.

Even the most distant person understands that in order to predict the price, you need to look at the vector of its movement in some time frame.

Therefore, deceived but stubborn people who try to learn and make money in ** Option are forced to look at 2 charts at the same time (** Option chart and a chart from another source). And in vain - all the same, there will be no sense. There is no liquidity.

2) Regulated by the FRRFR.

There are no state regulators in the CIS, all pseudo-regulators are private companies that belong to someone. And what can he do there?

3) Quotes provided by Thomson Reuters.

Not a fact. And even if it is a fact, the presence of a well-known supplier does not affect the quality of the services provided to the client.

4) Safety of funds in a European bank.


Europe is big and there are offshores in it, for example. — Cyprus.

If you write something like this, please give the exact name of the depository bank and the details of your current account.

5) You don't earn. You are allowed to do it on purpose.

And if it so happened that suddenly you were lucky, then your subsequent profit decreases from 70% to 50% and lower. On what basis? Fuck knows him. And yes, tech support doesn't work.

No matter what is written on the site, you already know what real options are and analyzing the casino for how it meets the requirements of another area is a stupid job.

But the ** Option approach to advertising deserves special attention:

They pull over the image of famous brands (which they trust) - payment systems, companies (google, microsoft, facebook), even formula 1 attributed. All this in order to project their image onto themselves.

Make themselves a solid company on the one hand.

On the other hand, you should go to their vk group. Publications and staged videos are made in the language of the target audience - sorry, cattle.

What is worth only one video, where some now successful pseudo-trader talks in a boyish style about how during the ceremony of drinking beer in the evening on the bench, his friend Misha told the secret of buying a BMW from earning on ** Option.

I'll tell you honestly, if this mythical Misha knew what options are, he would go to the clinic (like someone's friend from the comments on the previous post).

Conclusion about ** Option:

1) Casino 2) Not regulated by anyone, no license, nothing to do with the market 3) Opportunity to earn - only if you are the same Misha or you are lucky to be among those who, from the master's shoulder, were allowed to close the deal in +, so that he would tell everyone.

** Option for those who have this very IQ below 75. I apologize if I offended the feelings of the current clients of this company, we will return to talking about your feelings in six months or a year.

The opinion of the editors may not coincide with the opinion of the author.

Author: aboutforex