In binary options trading, you’re predicting whether an asset class will be above or below a certain price at a certain time. Here’s where the gambling knock comes in. If you’ve ever been to Las Vegas, it’s a little like over/under betting. Predictions like this aren't the best strategy for most investors. We strongly recommend a portfolio of index funds for long-term goals such as retirement. But if you have some extra cash and you want to ease into options trading, binary options contracts can be a decent way to do it. Binary options are often referred to as “yes or no” investments. If you think an asset will be above a set price, you’re predicting "yes" and buying the binary option. If you think an asset class will fall below a set price, you’re predicting "no" and selling the binary option. There’s a low barrier to entry. A binary option contract won’t cost more than $100. You’re not buying the underlying investment or even the option to buy the underlying investment. You’re simply placing a bet on how that investment’s price will move. These contracts always close at either $0 or $100; you either win or lose. If you predict the price movement correctly, you’re on the winning side of the trade, and the person on the other end of the contract — who predicted incorrectly — is on the losing side. Your earnings or losses can’t top $100 on a single contract, which means your exposure to risk is limited. Limited, but far from nonexistent. You can trade multiple contracts to increase potential profits; the less fun side of that coin is that you’re also increasing potential losses.