What Are Binary Options and Why Are They Considered High-Risk?

Binary options are a type of derivative where the payoff is either a fixed monetary amount or nothing at all. The trader wagers on a simple "yes" or "no" proposition, such as whether the price of Bitcoin will be above a certain level at a specific time.

They are considered extremely high-risk because they are an all-or-nothing bet. Unlike traditional options, the magnitude of the price move doesn't matter, only the direction.

This structure encourages speculative, short-term gambling rather than strategic investment, and many regulators have warned against them.