Has anyone here heard of binary option trading ?

http://answers.yahoo.com/question/index;_ylt=AwrJ56utG3pbU3sAyVMPxQt.;_ylu=X3oDMTByMjB0aG5zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzYw--?qid=20130714175853AAfowcm

Best Answer: You should realize that binary options are a scam. The odds are so stacked against you that you cannot possibly win long term.

It is just unregulated gambling at terrible odds. Here's how the math works for 70% payout.

Win: 70%
Lose: 100%
Expected value of each trade: (70 - 100 ) / 2 = -15%

You would have to predict over 60% just to break even.

A legit options broker would be registered on appropriate government sites. None of the widely promoted sites are regulated. Many are in obscure countries with no customer protection, with at least 2 widely advertised firms in Cyprus.

US: Check CFTC and SEC sites
UK: See FCA site (No longer FSA)

The CFTC link below about investing risks applies to both forex and binary options.

these are the 2 links from that page
http://www.cftc.gov/opa/enf98/opaforexa15.htm

http://www.sec.gov/news/press/2013/2013-103.htm

Binary option trading is illegal in the US and you should delete your post immediately if you don't want to feds to knock down your doors.

If you live in a country where this is legal, you can go ahead and lose all your money if you wish to do so.

Sounds like you should hire a financial advisor or something if you need to make a few millions each year legally in the stock markets buying Tinder or Match.com or Facebook or Twitter.

and how is it compared to algorithmic trading?

Binary Options Trading is not, in itself illegal in the US. However, to be done legally, it must be conducted on regulated US exchange. All others are illegal and many are vectors for scams. Nobody's going to bust down your door if you try (but maybe if you run an unlicensed exchange).

That said, binary options trading is buying an option with a binary outcome. Like a bet on a game won or lost. Your option pays or doesn't based on the underlying security reaching a certain price, and unlike regular options, you probably don't have the option of selling your option once bought.

Regular options in the US are based on underlying securities, but when the strike price is exceeded, the payout (value of the options contract) depends several factors, including the price of the asset, the time left. You can also buy or sell at any time before the expiration day, during market hours, at the current price.

To answer Vikranth's Q, it has nothing to do with algorighmic trading.