Gambling or Investing? U.S. Regulators Cracking Down on Binary Option Trading Platforms

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This intrinsic volatility is more so pronounced during any major news story i. As a result of the nosebleed valuation and volatility, in my opinion, options go hand-in-hand when committing capital to Netflix stock. Options trading orinvesting is high growth stock options trading orinvesting investors are willing to pay a premium for this growth.

Due to its rapid growth, expanding original programming, wrestling market share away from big cable companies, expansion into international markets and its overall ubiquity, it's easy to see why investors are willing to pay a premium for this media disruptor.

Due options trading orinvesting these aforementioned factors, an options strategy may be an effective way to leverage and hedge this high growth stock while mitigating risk. Netflix offers high yielding premiums on a bi-weekly or monthly basis options trading orinvesting one owns the stock or attempting a good entry point.

I provide my real life examples embedded around trading Netflix and its intrinsic volatility. I utilize options to extract additional value out of positions in addition to mitigating risk.

I earmark a portion of my portfolio solely for options trading in more volatile stocks. The empirical example demonstrated here is part of my overall options strategy. I options trading orinvesting not want to misconstrue readers into the belief that options are trivial in options trading orinvesting sense. To contend options trading orinvesting this volatility, one can leverage his stock or cash position via writing option contracts to mitigate these swings while remaining long or establishing an entry point in this volatile stock.

Table 2 - Realized profits expressed net of fees for the covered call contracts. This equates to a realized Details from each option contract can be seen below in Table 3. Table 3 — Details of each option contract over the options trading orinvesting six months. This simply stated, yields a situation where I sell a put option and receive a premium in exchange for the obligation to buy the shares at a specified price by a specified date.

Alternatively, if the shares are not assigned I will have made a 9. If the shares are assigned then I will begin to write covered calls against these shares as I did before.

However, I was writing this option at risk due to the increased uncertainty surrounding the upcoming earnings report. The earnings report would either move the stock up or down in a dramatic move. I wanted insurance in the event the report turned out to be negative and fortunately for me this strategy worked out well. As a result of the nosebleed valuation and volatility, in my opinion, options go hand-in-hand when deploying options trading orinvesting into Netflix stock.

The author has no business relationship with any companies mentioned in this article. He is not a professional financial advisor or tax professional. This article reflects his own opinions. This article is not options trading orinvesting to be a recommendation to buy or sell any stock or ETF mentioned.

Kiedrowski is an individual investor who analyzes investment strategies and disseminates analyses. Kiedrowski encourages all investors to conduct their own research and due diligence prior to investing.

Please feel free to comment and provide feedback, the author values all responses.

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The answer is not clear cut. So the answer is not black and white. A hedge fund manager buying a large chunk of shares in a multinational corporation has an element of risk to it. Any form of financial disaster could impact that company. The manager is hopefully aware of this, but is satisfied that the potential gains are worth the risk.

That would strike me as a gamble. So if we have established that it is possible to gamble in traditional share trading, it is certainly possible in binary options. But just like the hedge fund manager above, it is also possible to trade based on expected value. In my opinion, once a positive expected value has been established, the line has been crossed from gambling to investing. Firstly, there is nothing wrong with using binary options for a flutter, as long as you know that is why you are using them and are not gambling with money you cannot afford to lose.

That applies equally if you are using them to trade really! Binary options offer a quick, exciting way to speculate on the markets and are probably more entertaining than some other forms of betting, so why not? Some of the platforms are designed with gambling absolutely at the forefront of the design — flashing lights, pulsing price graphs and competitions.

People who use binaries for a bit of fun are well catered for. If however, you want to avoid using them to gamble, there are a couple of checks you can make, based on your own trading:. So whether binary options are gambling or not depends on the trader. They can be used to gamble, but they can also be used to invest. It all comes down to what is going on between the ears of the person placing the trade.

Is This Simply Gambling? Is All Investing Gambling? Are binary options gambling?