I recently came across Bitcoin Binary Options. I didn't really understand what Binary Options mean, is this like actual Bitcoin trading or is it one more scam I need to avoid ?
Bitcoin Binary Options are financial instruments that allow you to predict if the price of Bitcoin will rise or fall in a specific amount of time. They are called binary options because there can only be 2 outcomes - either you get your payout, or lose your money.
Each option has a predetermined expiration date and an agreed payout. For example, if you decide to buy a "call" Binary Option on Bitcoin this means you think the price will rise. If at the stated expiration date the price was higher than what you've bought it at, you get your payout.
Binary options seem to resemble gambling in a way that you don't have to have any prior knowledge in order to succeed or fail in them. It's just "betting" which way the price will go which is almost impossible to do consistently in short time frames.
There have been many complaints about Binary options being scams and it's important to see that the company you're considering is regulated in your country. Also, if you dig a bit deeper into the math of Binary options you'll find out that just like a casino the house has better odds at profiting in the long run.
For more information you can read this article.
I think this says it all:
"We go by the last price rates that we receive directly from MTGox, the biggest exchange house over the web. If you think that it's not the most trustworthy source of information out there, please contact us via the feedback form on our website and propose a platform you trust. So far we have questioned more than 1000 people and the majority opinion was that mtgox.com is the only place on the net that provides credible information about direct exchange rates." -- BTCLevels
Mt Gox does not reflect fair exchange rates right now because of their withdrawal problems. So this is not legitimate hedging. At least, it isn't now. It might have been in the past. (Though I can't imagine how. Who needs a 12 hour hedge on Bitcoins?)
Basically a form of investing / gambling where you decide on the direction that a commodity / stock will move. There's information on bitcoin binary options here http://www.binaryoptions.com/best-bitcoin-binary-options-brokers/
Its a form of gambling with the house as counterparty.
So you gamble against the house. For this reason your expected return is less than you are wagering in the long run. of course you can have your day in the sun BUT the house has the edge.
Additionally, depending on the trustworthiness of the company you're gambling with, there are certain ways to increase the house edge drastically.