Mar
07
2022
bitcoin coin

5 Most Private Cryptocurrencies

By | Growing Wealth, invest, Investing | Comments Off on 5 Most Private Cryptocurrencies

Bitcoin is one of the most secure cryptocurrencies, with a hash rate that climbed to an all-time high in January 2022. But transactions made on the Bitcoin blockchain are transparent and can be seen by anyone using widely-available blockchain explorer websites.

While future upgrades to the Bitcoin core code could make transactions more anonymous, for now any Bitcoin transaction can potentially be traced back to its source. This has led developers on a quest to create the most private cryptocurrency.

Top Privacy Coins and How They Work

There are a variety of technological methods that cryptocurrencies use to anonymize transactions. Which method works best to create the most secure cryptocurrency is a subject of heated debate within the community.

For investment purposes, it should be noted that all of these coins are highly speculative, risky, and can require opening a digital currency exchange account to trade them. As a general rule, the smaller the market capitalization and daily trading volume, the higher the risk.

Here are some of the top privacy coins available on the market today.

1. Bytecoin (BCN)

Bytecoin , which is based on the CryptoNote technology, claims to be the “first private untraceable currency.” CryptoNote was created with the goal of making transactions both a) untraceable and b) un-linkable.

Untraceable means observers cannot tell who sent a transaction to a specific recipient, while un-linkable means that observers cannot tell whether or not any two transactions were sent to the same source. The untraceable aspect is accomplished through ring signatures.

These ring signatures make its transactions opaque, meaning observers can’t see who sent the transaction, how much it was for, or who received it. Ring signatures basically string transactions together in a way that makes it difficult (but not entirely impossible) to tell them apart from each other.

To achieve un-linkable transactions, CryptoNote uses one-time keys. With ring signatures, it’s still possible to see incoming transactions to a single public key (wallet address). To fix this, CryptoNote automatically generates one-time keys whenever someone receives coins. It’s based on an encryption method known as the Diffie-Hellman Key Exchange, which allows for the sharing of secret data between two parties.

When someone sends Bytecoin to another Bytecoin address, the sender creates a unique code that gets used in the transaction. This unique code makes it look like the coins were sent to a different crypto wallet each and every time.

As of late February 2022, BCN had a market cap of $30.2 million and daily trading volume of about $30,695.

2. Monero (XMR)

Like Bytecoin, Monero is a private cryptocurrency that has privacy features built into all its transactions. XMR is actually a hard fork of BCN. That means Monero uses the same privacy tech as Bytecoin and shares most of the underlying characteristics.

When Bytecoin was created in 2012, 80% of the total supply was already in existence, as opposed to most mineable cryptocurrencies that begin with very little supply in existence.

This led seven of the developers working on Bytecoin to create a new coin by hard forking the BCN network. They called this new coin Bitmonero, which was then changed simply to Monero, which means “coin” in Esperanto.

As of late February 2022, Monero is worth over $2.7 billion with a daily trading volume of about $128 million.

3. Zcash (ZEC)

Zcash uses a technology called “zk-SNARKs,” short for zero-knowledge succinct non-interactive arguments of knowledge.

The exact details are about as complicated as the name makes it sound. What matters is that zk-SNARKs allow one party to prove to another that something is true without revealing anything specific, making this solution ideal for private crypto transactions.

However, privacy is not a default feature of Zcash, meaning that transactions are not automatically made anonymously. Zcash allows for four different types of transactions with varying levels of privacy.

The pros of Zcash is that it has some of the strongest privacy protocols on the market and the second-highest market cap of any coin on this list. The con might be the different types of transactions leading to confusion among users, some of whom might assume all Zcash transactions to be private.

As of late February 2022, Zcash is valued at $1.5 billion with a daily trading volume of about $265 million.

Up to $100 in bitcoin2 – just for you.

With 30 coins available, our app offers a secure way to trade crypto 24/7.

4. Dash (DASH)

Dash was the first private cryptocurrency created in 2014. Originally called DarkCoin, the coin eventually rebranded itself as DASH, short for “digital cash.”

As the name implies, Dash is meant to be used as a medium of exchange. Transactions can clear in a second and can cost less than a penny.

In addition to the typical crypto miners, Dash uses something called “masternodes.” These central masternodes receive 45% of all DASH mining rewards in exchange for performing essential functions on the network, including making transactions private and processing them quickly.

One of the potential cons of DASH is that these masternodes make the network more centralized than some other crypto networks.

As of late February 2022, DASH is valued at more than $968 million with $176 million in daily trading volume.

5. Verge (XVG)

Verge describes itself as a “cryptocurrency designed for people and everyday use.” Verge was created in 2014 as DogeCoinDark. Like Dash, DogeCoinDark rebranded itself shortly after its inception, changing its name to Verge.

Verge uses a technology called the Wraith Protocol to make transactions private. Wraith Protocol anonymizes transactions through the Tor Network.

By routing internet connections through multiple anonymous nodes around the world, The Tor Browser works to hide IP addresses. Wraith Protocol uses this tech for the purpose of anonymizing cryptocurrency users. This feature is optional and must be turned on.

Some benefits of Verge include fast transactions, low fees, and the potential to scale and be used by more people. The big drawback is that most of the total supply of XVG is already in circulation, so the coin will likely lose value in the long-term due to inflation, just like Bytecoin.

As of late February 2022, Verge is valued at around $155 million with a daily trading volume of around $6.4 million.

The Takeaway

Privacy coins have only existed since 2012, and didn’t really burst onto the scene in a big way until 2014. The tech is even newer than Bitcoin, and the landscape is constantly changing.

Monero is thought to be one of the most private cryptocurrencies, so much so that it has been the subject of scrutiny by regulatory agencies. But some privacy enthusiasts argue that coins like Zcash have better privacy protocols and that they might be the most secure cryptocurrencies. The subject is still up for debate.

Looking to get into cryptocurrency? With SoFi Invest® you can buy cryptocurrency from more than two dozen crypto coins including Bitcoin, Chainlink, Ethereum, Dogecoin, Solana, Litecoin, Cardano, and Enjin Coin. Investor information is kept secure and never shared with any third parties beyond what is detailed in our privacy policy.

Trade crypto and get up to $100 in bitcoin! (Offer is available through 12/31/23; terms apply.)

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE


Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN20200

2Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.
First Trade Amount Bonus Payout
Low High
$50 $99.99 $10
$100 $499.99 $15
$500 $4,999.99 $50
$5,000+ $100
Read more
Feb
22
2022
Guide to Jade Lizards

Guide to Jade Lizards

By | Growing Wealth, invest, Investing | Comments Off on Guide to Jade Lizards

A Jade Lizard is an advanced options strategy that requires taking three different positions. It is a slightly bullish strategy typically used by traders who want to profit from high levels of market volatility.

Traders who use the Jade Lizard strategy must monitor their position and have a plan for exit to avoid the potential for significant losses. The maximum profit for a Jade Lizard strategy is the initial premium received when opening the trade.

What Is a Jade Lizard Option Strategy?

With a Jade Lizard trade, you will enter into three different options positions on the same underlying stock through your brokerage account. The first two positions require selling a call spread, which involves selling a call option at one strike price and buying a call option with the same expiration at a higher strike price. The third and final option position is a put at an even lower strike price.

With a Jade Lizard, these options are usually at out-of-the-money strike prices. The strikes should be selected such that the total premium received from selling the call spread and selling the put option are greater than the width of the call spread. Don’t worry — if it’s not clear what that means, we’ll illustrate in the example that follows.

How Does a Jade Lizard Work?

A Jade Lizard option trade is a neutral to bullish options strategy, which means that you should anticipate the price of your underlying stock to stay the same or go up. With a Jade Lizard options strategy, you are hoping to capture the premium that comes with higher levels of implied volatility, so the ideal environment to execute the trade is one where volatility is elevated.

Setting Up a Jade Lizard

When you set up a Jade Lizard, you should initially be collecting premium from both the call spread and put that you are selling. The key concept of setting up a Jade Lizard is that you want the total amount of premium that you collect initially to be more than the width of your call spread.

As an example, say that stock ABC is trading around $60. You could sell a 58/62/63 Jade Lizard, at these hypothetical prices, on options expiring in 30 days:

•   Sell ABC 62 Call for 1.25

•   Buy ABC 63 Call for 0.90

•   Sell ABC 58 Put for 0.75

Your net credit is $1.10 ($1.25 minus $0.90 plus $0.75), so you collect $110 for each contract that you implement (since one contract typically controls 100 shares of the underlying stock). In our example, you have no risk should the stock move to the upside. To illustrate how, suppose the stock trades above 63 on expiration day. The put option expires worthless, and your maximum loss on the call spread is $100, which is less than the $110 you collected up front. On the other hand, you do have nearly unlimited downside risk if the underlying stock goes to 0. This is the main reason that the Jade Lizard options strategy only makes sense for stocks where you have a neutral to bullish outlook.

Maximum Profit

You will achieve your maximum profit if the options expire with the underlying stock having a price in between the strike price of your put option and the strike price of your lower call option. In our example above, if the stock closes between $58 and $62, then all three options expire worthless and your profit is the $1.10 in initial premium that you collected.

Maximum Loss

In a Jade Lizard strategy, you have nearly unlimited downside exposure, since you are selling a put option. A put option increases in value as the price of the underlying stock goes down. Since you are short the put option, as the stock price goes down you could be on the hook for the difference between the strike price of the put and the price of the underlying stock.

Breakeven Point

The breakeven point for a Jade Lizard on the downside is the difference between the strike price of the put option and the initial premium collected. In our earlier example, we collected $1.10 in net premium, so our breakeven point is $56.90 (the difference between $58.00 and $1.10).

There is also a potential breakeven point to the upside. Ideally with a Jade Lizard, you collect more in initial premium than the width of your call spread. In our example, we collected $1.10 in initial premium and our call spread is only $1 wide (between $62 and $63).

So if the stock closes anywhere above $63 when the options expire, your put will be worthless and your call spread will cost you $1 to close out, or $100 per set of contracts. That will leave you with a profit of $10 per set of contracts.

Exit Strategy

The exit strategy for a Jade Lizard involves purchasing back the options you sold using a buy to close order. When setting up the trade, it’s a good idea to set target profit at which you would buy back the options.

In our example, where we received $1.10 per share, you might look to close out the Jade Lizard when you could buy your options back for around $0.55 per share, 50% of the initial premium you received. The options may decline in value due to movement of the underlying stock, or time decay as the options get closer to their expiration.

Maintaining a Jade Lizard

A Jade Lizard is not a set-it-and-forget-it options strategy. Because of the unlimited downside risk, you’ll want to monitor your position, especially if the price of the underlying stock starts to go down. In that scenario, you may want to close out your position or roll down the strike prices of your short call spread.

Pros and Cons of the Jade Lizard Strategy

Here are some pros and cons of the Jade Lizard strategy:

Pros of the Jade Lizard strategy

 Cons of the Jade Lizard strategy
No risk of losses from upward price movement in the underlying Significant risk of downward price movement in the underlying
Immediate collection of the net premium Profits capped to the amount of premium initially received

Alternatives to Jade Lizards

One alternative to the Jade Lizard strategy is a strategy called the Big Lizard. With a Jade Lizard, you typically sell out-of-the-money options. With a Big Lizard strategy, the options that you sell are at-the-money, meaning that their strike price is close to the price of the underlying stock.

Investing With SoFi

The Jade Lizard strategy is an advanced strategy that options traders use when they have a bullish to neutral outlook on a stock. The strategy’s maximum upside is equal to the premium received when opening the trade, while the downside risk is essentially uncapped.

Learning about different options strategies can be a great way to further understand the stock market and how to invest. From there, you might consider an options trading platform like the one offered by SoFi. This platform has an intuitive and approachable design and allows investors to trade options from the mobile app or web platform. And if you aren’t done learning, there are educational resources about options available to explore.

Trade options with low fees through SoFi.

FAQ

How are Jade Lizards managed?

When opening a Jade Lizard options strategy, you want to make sure to keep an eye on the underlying stock until the options’ expiration date. Since a Jade Lizard comes with no upside risk, you should especially monitor negative moves in the stock price. In that case, you could close out your position or roll your call spread to a lower stock price, earning more premium.

How do reverse Jade Lizards differ from Jade Lizards?

In a reverse Jade Lizard, also known as a twisted sister option, you sell a put spread, being long the put option with the lower stock price. Additionally you sell a call with a higher strike price.

As the name suggests, a reverse Jade Lizard is the opposite of a regular Jade Lizard, and makes sense when you have a neutral to bearish outlook on a stock. You have risk of losses due to downard price movement and unlimited loss potential from upward price movement, due to the short call.

What is the maximum payoff of a Jade Lizard?

The maximum payoff or profit of a Jade Lizard is capped to the total initial premium that you receive when you open the position. This is equal to the amount you get for selling the put and short leg of the spread minus the amount of premium for the long leg of the call spread.

Photo credit: iStock/ipopba

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

SOIN0122049

Read more
Jan
31
2022
What Is a Box Spread & When to Use One?

A Guide to Box Spreads: What They Are and How They Work

By | Growing Wealth, invest, Investing | Comments Off on A Guide to Box Spreads: What They Are and How They Work

A box spread, or long box, is an options strategy in which a trader buys a call and sells a put, which yields a similar trade profile of a long stock trade position. Depending on which strike prices the trader chooses, the spread will come close to the current market value of the stock.

The arbitrage strategy involves a combination of buying a stock at one strike price and selling stock on another strike price. These trade quotes, when connected form a box and make the difference between the two strike prices.

What Is a Box Spread in Options Trading?

A box spread is an arbitrage options trading strategy used by traders attempting to profit by taking little to no risk. To do this, they’re using both long and short strategies.

This options trade involves a four-legged spread, buying a bull call spread with the corresponding bear put spread with both vertical spreads having the same strike prices and expiration dates. The box spread trading strategy is a delta neutral strategy because the trader is neither bearish or bullish, rather the goal of the trade is to lock in a profit.

Recommended: Popular Options Trading Terminology to Know

Traders using box trades are mostly professional traders such as market makers or institutional traders. Box spreads are not the best trading strategy for retail traders because they don’t yield high profits and transaction costs can impact potential returns. Large investment firms have the tools and resources to execute on box spread trades quickly and efficiently.

How Do Box Spreads Work?

To form a box spread, traders start out by buying a bull call spread and a bear put spread. These two options positions have the same strike prices and expiration dates. These trades must take place at the same time to execute a profit effectively.

The bear spread starts out with the trader taking a fixed profit, then after a period of time, the trader loses money then, the trader has a fixed loss. A bull spread is the opposite. Initially the trader incurs a fixed loss, then after a period time, the trader takes a fixed profit.

By taking both of these vertical spread positions, traders can lock in a profit that could potentially be risk free. In both corresponding positions there is either a fixed loss or fixed profit. This is why many traders see box spreads as a low risk trading option.

The bear spread bets that the stock price will decline while the bull spread bets that the stock price will increase. By combining both positions, the profit and loss offset one another, leaving the trader with a small profit, known as the box spread.

Recommended: Guide to Options Spreads: Definition & Types

How to Use the Box Spread Strategy

Traders make money on a box spread based on the difference between the two strike prices. When executed correctly, this is worth the difference in strike prices at expiration. This means, if a trader purchases a $100/$110 vertical spread, that trade would be worth ten dollars at expiration, no more, no less.

This is a guaranteed profit regardless of market volatility or whether the stock price increases or decreases. Traders execute on box spreads when an options contract is mispriced, or more specifically when spreads are underpriced.

If traders believe the outlook of the stock market will change in the future, they may take advantage of a scenario where put options are less expensive than call options, a perfect set up for box spreads.

When the trader believes the spreads are overpriced in relation to their value at expiration, the trader would employ a short box spread, selling a bull call spread with its corresponding bear put spread with the same prices and expiration dates. If the trade yields an amount higher than the combined expiration value of the spreads for selling these two spreads, that’s the trader’s profit.

Box Spread Risks

Many sophisticated investors think of box spread options trading as a risk-free trading strategy but in reality there is no such thing as a risk-less trade. When asset prices are misplaced, this is the ideal time to execute on a box spread. However, the market moves fast and prices can change quickly, so these trades can be difficult to fill and hard to identify in the first place.

Profits from box spreads tend to be small. Traders also need to consider expenses associated with these trades like brokerage fees, taxes, and transaction costs, which could eat at overall returns. This is why box spreads typically make the most sense for institutional traders who are able to do a high volume of trades and manage other expenses.

Another risk for traders to consider is early exercise. This is when a trader decides to exercise an option before expiration. If traders are in a box spread and exercise one of their positions early, they are no longer in a box spread and their risk/reward profile has changed. When employing a box spread trading strategy, early exercise could impact the initial desired outcome.

Box Spread Example

To execute on a box spread, traders buy the call spread at the lower strike price and the put spread at the higher strike price. By making these positions traders are “buying the box.” A lower strike call and a higher strike put have to be worth more to secure a profit.

For example, a trader takes two strike prices $95 and $100 and buys a long $95 call and sells the short $100 call, this is a long $95/$100 vertical spread. To form the box spread, the trader would have to buy the $95/$100 put spread. This means buying the $100 put and selling the $95 put.

These trading positions are synthetic, meaning, the trader copies a position to mimic another position so they have the same risk and reward profile.

For this example, at the $95 strike price, the trader is synthetically long and for the $100 strike, the trader is synthetically short. In other words, the trader in these positions is buying shares at $95 and selling them at $100 and the most the trader can make is $5 at expiration.

Start Trading Stocks with SoFi

The best time to use a box spread is when a trader believes the underlying spreads are underpriced relative to their value at expiration. While considered a low-risk, low-reward trading strategy, box trades may not be the best trading strategy for the retail investor. Still, understanding box spreads can be beneficial to understand the relationship between how different options can work together.

For market participants who want to start trading options, SoFi’s options trading platform is a great way to get started. The platform offers an intuitive, user-friendly design, as well as access to a slew of educational resources about options. Investors can trade options from the mobile app or the web platform.

Trade options with low fees through SoFi.

Photo credit: iStock/MicroStockHub

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

SOIN1121487

Read more
Jan
28
2022
What Are Binary Options? How to Trade Binary Options

What Is Binary Options Trading? How to Trade Binary Options

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What Is Binary Options Trading? How to Trade Binary Options


Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Binary options are a type of trading option in which investors either end up making up to $100 or they make nothing. Once the investor enters into the options contract, they don’t have to do anything else.

Below, we’ll give you the full rundown about binary options, including what they are, how they work, how to trade binary options, how to make money with binary options, and finally, why it’s so important to understand their ins and outs before making any moves.

What Are Binary Options?

A traditional binary option is a type of options contract, in which investors bet whether the price of the underlying stock will be above or the option’s strike price. In industry terms, they’re either “in the money,” or “out of the money.” Prices, of course, can be hard to predict, which is what makes binary options something of a gamble.

Recommended: In-the-Money (ITM) vs Out-of-the-Money (OTM)

Here’s a fairly straightforward example: You think that the price of Stock X will be $10 or more on January 4, at 4 PM ET. You acquire a binary option contract with that stipulation — the other party on the contract holds the other position, that the price of Stock X, on the agreed upon time and day, will be less than $10.

When the clock strikes 4 pm ET on January 4, Stock X’s price is either $10, or it’s less than $10. Depending on what it is, one person is “victorious.” There’s no middle ground.

International traders may offer other variations of binary options as well.

How Binary Options Work

The inner workings of traditional binary options requires a baseline knowledge of their key elements. That includes a few things:

•   The strike price. This is the price at which the option will execute, and when it comes to binary options, is the fulcrum point at which traders must choose a position — above, or below.

•   The underlying asset, security, or market. This is the security (stock, commodity, etc.) upon which the options contract is based. Since options are derivatives, they’re tied to an underlying asset.

•   The expiration date. The day and time when the contract executes.

•   The expiration price. The price of the underlying asset when the contract executes.

These elements (along with a few other minor ones) comprise a basic binary options contract. Now, as far as how the option actually works, it’s pretty simple.

In effect, an options trader buys a binary option contract from another party who has taken the opposite position. That is, if you were to buy a contract with the position that the option’s underlying asset will exceed the strike price on the agreed expiration day and time, the other trader would have the equal and opposite position — they’re betting that the underlying asset’s value will not exceed the strike price when it expires.

When the clock does strike midnight, so to speak, on the expiration date, one of the two positions will have made the correct choice. The value of the underlying asset will either be above or below the strike price. The successful trader then receives a payout.

That payout is either $100, or nothing, regardless of how much higher or lower the value of the security is compared to the strike price. It’s like betting $100 on a World Cup match — your team either wins, in which you get your buddy’s $100, or your team loses, and you have to fork over $100.

Like all options, pricing on binary options reflects the time value of money, and their price, though always less than $100, will fluctuate depending on their current price and the length until expiration.

How Binary Options Trading Works

If you have any experience investing online, it should be pretty easy to get started. But before you do that, of course, you’ll want to make sure that you know what you’re getting into. That means doing some homework about how binary options work, the risks involved, and considering whether binary options trading jives with your overall strategy.

With all of that in mind, actually trading options contracts is almost as simple as trading stocks. You’ll want to find a binary options broker (which are usually specialized brokers such as
Nadex , Pocket Option , and BinaryCent ), open and fund an account, and from there, start executing trades.

Pros and Cons of Binary Options Trading

As with any type of investment or trade, binary options have pros and cons. Here’s a quick look at them:

Binary Options: Pros and Cons

Pros

 Cons
Risks are capped Rewards are capped
Fast and efficient Highly speculative
Known payouts Fraud Concerns

Pros of Binary Options

There are some positives to trading binary options.

•   Limited risks. Traders can only lose so much if they end with the short straw.

•   Efficient process. Binary options trading is usually a fast, efficient, and easy process, and they expire quickly.

•   Known payouts. Since binary options are capped at $100, you know in advance what’s at stake. It’s always nice to know where things might land, right?

Cons of Binary Options

There are also some potential disadvantages to trading binary options.

•   Limited gains. There’s only so much “winning” a trader can do with a given binary options contract.

•   Speculative nature. You may get the feeling that you’re simply placing a bet at the roulette table when trading binary options, so prepare for that.

•   Unregulated markets. Some brokerages and exchanges that offer binary options operate outside of the United States, and away from regulators. That could increase the risk of fraud.

3 Potential Binary Options Frauds to Watch For

The risk of fraud is a bit more pronounced in the binary options sphere because many platforms and brokerages that allow traders to trade binary options are unregulated. That means they’re not conducting business under the authority of the Securities and Exchange Commission (SEC) or other regulators.

It’s worth noting that if you trade with a well-regarded broker, your chances of getting scammed are probably pretty slim. Even so, here are a few types of fraud that you may run into when trading binary options.

1. Identity Theft

You’re likely familiar with identity theft, and some traders have lodged complaints with regulators that certain online trading platforms have been collecting personal data (credit card numbers, etc.) and then using it as they will.

How might this play out in the wild? Let’s say you want to do some binary options trading, and after a bit of Googling, find a platform that looks fun and easy to use. You sign up, fork over some personal information, and start trading.

A while later, you might get alerts that your credit has been compromised, or something similar. This could be a sign of identity theft, and it may all stem back to when you gave your personal information to that trading platform.

It’ll require some investigation to get to the culprit (if it’s even possible), but the point is that some sites play fast and loose with personal information. Or, they may not do a good job of securing it.

As a rule, it’s generally a good idea to keep your personal data to yourself, and not upload it to unfamiliar platforms.

2. Trade Manipulation

You can’t win if the game is rigged, right? This is another common complaint lodged against certain brokerages. Specifically, some traders say the exchanges manipulate the software used to execute trades to ensure the trader ends up on the wrong side of the trade.

In effect, this would be a case of the dealer taking a peek at the next card in the deck during a game of Blackjack, seeing that you’re going to hit “21,” and replacing the winning card with another.

3. Refusing to Credit Accounts

Another common complaint is that some platforms accept customer deposits, but then don’t allow them to withdraw the funds. Platforms may cancel withdrawal requests, or ignore them, leaving traders unable to access their money.

If this happens and the brokerage or platform you’ve been dealing with is in a foreign country (or its location is unknown), you might be out of luck. Again, stick to well-known brokerages or platforms, and you’re less likely to run into these types of issues.

Binary Option Fees

The fees for trading differ depending on the platform or brokerage you’re using, so that’s something to keep in mind when deciding where you want to execute trades.

Some platforms make money through commissions, and as such, will incorporate fees into contract spreads. Others simply charge a per-contract fee. Check your preferred platform or brokerage’s pricing guidelines to make sure you’re comfortable with any applicable fees.

The Takeaway

Whether you’re interested in trading binary options or stocks and bonds, it’s important to do your homework first. That means understanding a financial instrument, be it a binary option, or a vanilla stock, before you add it to your portfolio.

An options trading platform like SoFi’s can make it easier to understand what you’re getting into, thanks to its library of educational resources about options. The platform’s intuitive and approachable design allows you to trade options through the mobile app or the web platform, depending on what you prefer.

Explore SoFi’s user-friendly options trading platform.

Photo credit: iStock/dinachi

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.

SOIN0821355

Read more
Dec
23
2021
business man on phone

What is Ripple XRP? Everything to Know for 2022

By | Growing Wealth, invest, Investing, Terminology | Comments Off on What is Ripple XRP? Everything to Know for 2022

Cryptocurrency is a fast-moving space with new technologies and names arising on a daily basis. One of the largest and more polarizing subjects in the space is Ripple XRP, a private-company-founded platform and cryptocurrency launched in 2012. It has gained notoriety for its unique founding, structure, and operations.

Ardent supporters back its real-world adoption and growth potential. Dissenters contend that because of many of these same factors, it’s philosophically misaligned with cryptocurrency ideals and fundamentals.

Despite these contentions, Ripple XRP has grown to become a household name in cryptocurrency. Here’s everything you need to know about this cryptocurrency, and how to invest in it.

What Is Ripple?

Ripple is both a currency-exchange system designed to allow fast and low-cost transactions, and a cryptocurrency in its own right. Ripple’s primary goal is to connect financial institutions, payment providers, and digital asset exchanges to provide faster and cheaper global payments.

Created in 2012 by Jed McCaleb and Chris Larsen, Ripple is perhaps better known for its open-source, peer-to-peer decentralized platform, RippleNet, which enables money to be transferred globally in any fiat or cryptocurrency denomination between financial institutions.

Ripple makes some improvements on common shortfalls associated with traditional banks. Transactions on the Ripple Network are settled in seconds even under the regular stress of millions of transactions. Compare this to banks’ wire transfers which typically can take days to weeks to complete and can cost anywhere from $15 to $30 or more if sending or receiving internationally. Fees on Ripple vary based on the transaction size but overall are minimal, with the minimum cost for a standard transaction at 0.00001 XRP.

Whereas top cryptocurrencies like Bitcoin, Ethereum, and Litecoin are designed to be used primarily by individuals, Ripple’s system is designed to be adopted by banks, funds, and institutions.

What Is XRP?

XRP is the currency issued and managed by Ripple (though users can also create their own currency on the platform). Ripple began selling XRP in 2012 to fund company operations, allowing its users to buy cryptocurrency, though it has taken a backseat to the company’s primary objective of developing RippleNet.

Throughout Ripple’s lifespan, leadership has reframed how XRP fits into the company’s business model, originally proclaiming it as the fuel on which its borderless payments technology runs, and later as a more efficient medium of exchange than Bitcoin.

XRP tokens represent the transfer of value across the Ripple network and can be traded on the open cryptocurrency market by anyone. Unlike Bitcoin’s popular store-of-value narrative use-case, XRP is primarily used for payments and borderless currency exchange. While Ripple’s centralized infrastructure concerns some in the cryptocurrency space, its fast transaction speeds, low transaction costs, and low energy usage provide superior performance as a medium of exchange compared to many blockchain-based cryptocurrencies.

(Need a crash course on crypto before you can read any further? Check out our guide to cryptocurrency.)

What is the XRP Price?

At the time of reporting, the XRP price is $0.474494. It’s all-time high was $3.8419 in January 2018. It went as low as $.0041 in November 2015.

How Does Ripple Work?

There are two main technologies to be aware of when it comes to Ripple and XRP. Specifically, the XRP ledger (XRPL) and the Ripple Protocol Consensus Algorithm (RPCA). Here’s how they work.

XRP Ledger (XRPL)

RippleNet is built on top of its own blockchain-like distributed ledger database, XRP Ledger (XRPL), which stores accounting information of network participants and matches exchanges among multiple currency pairs. The transaction ledger is maintained by a committee of validators who act like miners and full-node operators to reach consensus in three to five seconds—versus Bitcoin’s 10 minutes. Because there are no miners competing to confirm transactions for block rewards, validators verify transactions for no monetary reward.

Anyone can become an XRP validator, but in order to gain trust and be used by others on the network, validators must make Ripple’s unique node list (UNL), deeming them a trusted Ripple validator. These centralized validators are critical to prevent double-spending and censorship of transactions. There are only 35 active XRP validators; six are run by Ripple.

Ripple Protocol Consensus Algorithm (RPCA)

XRP’s design is predicated on speed and cost, as opposed to decentralization. Unlike different types of cryptocurrency like Bitcoin and Ethereum, which are built on the blockchain and validated by miners through the Proof of Work consensus mechanism, Ripple confirms transactions through its own consensus mechanism, the Ripple Protocol Consensus Algorithm (RPCA).

By avoiding Proof of Work’s energy-intensive mining, Ripple transactions require less energy than Bitcoin or Ethereum, are confirmed faster, and cost less. However, this speed is ultimately achieved because of XRP’s centralized infrastructure, which some argue makes the network less secure, censorship-resistant, and permissionless than open-source blockchain networks.

Ripple Cryptocurrency Token Supply

Unlike many other cryptocurrencies, XRP is not mined. The token’s entire supply was created when the network first launched in 2012 and Ripple executives intermittently tap into an escrow to release segments of the supply to sell on the open market.

In other words, unlike Bitcoin’s decentralized economy, XRP’s supply and issuance is centralized and governed by a few authorities. Because the total supply already exists, no more will be created into existence, thus making XRP fixed in quantity and not inflationary.

As of January 2021, only 45 billion XRP tokens are in circulation, out of the maximum total 100 billion. Due to the vast circulating supply, XRP has had one of the largest market caps of any cryptocurrency, even briefly eclipsing that of Ethereum’s second-largest cap late in the 2017-2018 bull market.

Ripple Crypto and Regulatory Trouble

In late 2020, Ripple became the target of an SEC investigation . The regulatory body determined that Ripple Labs Inc. and two of its executives, Co-Founder Chris Larsen and CEO Bradley Garlinghouse, had raised over $1.3 billion through an “unregistered, ongoing digital asset securities offering” to finance the company’s operations. Consistent with recent cryptocurrency rules set by the SEC, Ripple’s leaders were charged with unlawful issuance of securities in the form of sales of its XRP token, raising questions about compliance with cryptocurrency taxes.

The XRP price crashed amid the fallout, from over $0.60 to under $0.30, as prominent crypto exchanges began delisting the token and Ripple executives, including Founder Jed McCaleb, sold off personal XRP holdings worth millions.

Is Ripple a Good Investment?

Though XRP has been impacted by Ripple’s legal blow, XRP is an independent token that can and does function somewhat outside of Ripple’s business model. The crash in price and soured fundamental outlook may not paint a bright picture of XRP as an investment to some. Whether XRP recovers and continues to evolve with the rest of the crypto herd remains to be seen, but as investors look for value in undervalued assets, it doesn’t hurt to do further research and form an educated conclusion.

Pros and Cons of Ripple XRP

Because Ripple is different in some ways from other cryptocurrencies, it makes sense to review its perceived pros and cons before making any investing decisions.

Pros of Ripple XRP

•  Fast speeds
•  Low fees
•  Interest/tentative adoption by financial institutions

Cons of Ripple XRP

•  Centralized infrastructure, governance, issuance
•  Corruptible validators
•  Unsupported by many exchanges

How to Invest in XRP

To start investing in Ripple, you first need to join a crypto exchange. Signing up for an account could include different verification processes, depending on the exchange. Once you’re signed up, you’re ready to trade or buy Ripple XRP. You can trade any current crypto you own, or you can buy a major cryptocurrency like Bitcoin or Ethereum and then use that to buy Ripple XRP.

The Takeaway

Ripple XRP is a global digital payments system that sacrifices decentralization for performance. The network and technology is owned and at least partly run by Ripple, the private company, which controls the underlying infrastructure, supply, and some of the limited network validators. While Ripple strays from the conventional decentralization model adopted by leading cryptos Bitcoin and Ethereum, it conforms to some degree through its own specially — designed infrastructure.

Although Ripple’s primary goal is providing a borderless payments and currency exchange gateway for financial institutions, its native cryptocurrency XRP has taken on a life of its own and is actively traded and analyzed by investors. With high-ranking metrics such as fast and inexpensive transactions, some investors argue XRP is a strong competitor to large cryptocurrency blockchains such as Bitcoin and Ethereum. Conversely, Ripple XRP’s centralization has been a major philosophical and security concern for others — including US regulatory bodies.

Cryptocurrency is an exciting new technology that’s disrupting money as we know it. With SoFi Invest®, members can trade some of the most popular cryptocurrencies, like Bitcoin, Ethereum, Cardano, Dogecoin, and Litecoin.

Find out how to invest in cryptocurrencies with SoFi Invest.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE


Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.

All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.

SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.

SOIN21004

Read more
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2026 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender