That’s pretty much what they are but they’re not only limited to FOREX.
Just Google ‘Binary Options Broker’ and you’ll come across many. There are different types of Binary Options offered as well e.g. price must close above or below a certain price at the time of the expiry of the option (but you cannot ‘choose’ the prices i.e. they GIVE you the prices based on their ‘spread’ and note that this is not the same as what we know as a ‘spread’. It’s more of a ‘range’ that somehow they calculate). Another ‘version’ is that price only has to ‘touch’ a certain upper or lower price within a certain time period (again they calculate the ‘range’). And there are various other type of these things available.
Put it this way: if it were run ‘honestly’ or ‘transparantely’ it could be a good way to make money especially if, as I said, you’re ‘pretty good’ at taking profitable positions in ‘normal’ trading on short timeframes. And the, let’s call them ‘proper’ (Binary) Options Brokers will allow YOU to specify the price ‘ranges’ and therein lies the difference. These, let’s call them ‘Retail Binary Options Brokers’ (I believe) carefully calculate those ranges and / or manipulate the closing (expiry) time of the options and believe me NEITHER is designed to assist you in being profitable. The main problem with these type of brokers is that there’s no price reference point. I’ll guarantee you that there will be ‘every reason under the sun’ as to WHY as far as YOU were concerned your Binary Option expired ‘in the money’ but there’ll be an explanation (price spike??? Internet connection speed issue causing a delay???) as to why it didn’t. I mean: a short delay in closing the option or a single tick seconds before the expiry of the option will make the difference between closing ‘in the money’ or ‘out of the money’.
Also (and I think this was one of the things John was addressing): the ‘odds’ are ‘mathematically stacked’ against you. In other words: the loss (cost) of the option will always exceed the possible gain if the option expires ‘in the money’ unlike with ‘proper’ trading where there really is no limit to the amount of profit that you can make on a trade while still fixing your risk / stop.
And don’t get me wrong here: I must have messed about with this stuff for about a month and couldn’t believe how my demo accounts were growing at the time IN SPITE of the ‘shenanigans’ that I saw being ‘pulled’ and never got answers to. But I’ll wager that the live accounts are manipulated with far more of a concerted effort.
All I’m saying is that they are indeed a viable and legitimate trading vehicle and a method of limiting risk and minimising losses on a ‘directional’ trade (trend trade) that went awry. But NOT at these ‘make a million in five minutes’ brokers. I’ve got no ‘axe to grind’ with any of them because I’ve not put one single LIVE cent into them. It’s just something that I’ve noticed appears to be gaining in popularity because on an intense advertising onslaught (much the same as with FOREX trading when it started becoming popular).
On the other hand: if you really think about it they’re nothing different than trading ‘normally’ but with a bad risk / reward ratio e.g. risking 100 points (pips) to make 20. That type of thing.
Anyway: I just thought it’s something that would be worth a mention is all. All I know is that I saw some serious manipulation on DEMO accounts (now how dumb does a person have to be to manipulate a DEMO account i.e. at LEAST with (SOME) FOREX brokers it’s the OTHER way around)!!! LOL!!!