Binary options are significantly different from vanilla options. Plain vanilla options are a normal type of option that will not include any special features. A plain vanilla option provides the holder the right to buy or sell a fundamental asset at a specified price on the expiration date, which is also known as a plain vanilla American option. While a binary option has special features and conditions, as explained previously.
Binary options are regulated by the Securities and Exchange Commission and other regulatory agencies, tend to be most likely exchanged over the Internet on platforms existing outside of regulations. Because these programs operate outside of rules, investors are in greater risk of fraud. Conversely, vanilla options are typically managed and traded on major exchanges.
For example, a binary option trading program may require the entrepreneur to deposit an amount of money to acquire the option. If the option expires out-of-the-money, signifying the investor chose the wrong proposition, the trading platform may take the complete sum of deposited money with no refund provided.
This is the classic match up of risk vs reward.
Traded on Major Markets
Often not traded on Major Markets
Not Backed by Financial Advisory Commission
Potential Higher Reward
On Paper, it comes down to how risk adverse someone is. Like any financial purchase, it really is about how knowledgeable you are on the market. A Binary Option being traded through a trusted party has no more inherent risk than a vanilla option. But traded by a novice? Even a CD has risk to it.