In March earlier this year, the FBI released an article online warning of the dangers of binary options. Opening with a ‘word of warning to the investing public’, the fact the FBI has now got involved and is monitoring binary options heavily perhaps suggests all we need to know about the niche. However, it would be unfair to assume that all binary options are frauds just out to get your money. Therefore, we’re going to dig beneath the surface today and find the truth behind the topic!
What Is A Binary Option?
In 2008, exchange-traded binary options were approved by the US Securities and Exchange Commission which opened the door to this niche. Essentially, a binary option provides investors with a method of trading price fluctuations across several global markets. Compared to traditional trading options, binary options are different in payouts, fees, risks, and liquidity. Today, they’re classed as ‘exotic’ options and, by investing, you’ll either receive a payout or your money will be lost.
Available Binary Options
Before we address the ‘are binary options scams’ question, we should first note the two major types available. With the first, we have an option called ‘cash or nothing’ and this one pays out a fixed amount when ‘in-the-money’ at the expiry date. Meanwhile, the second option of ‘asset or nothing’ will pay the underlying security’s value.
With the most common form of binary options, the idea is to bet on the price of an individual stock. For example, perhaps you think it’ll increase in price to $70 by the end of the day. For this reason, you purchase a binary option at the cost of $50. If the stock price reaches $70, you’ll be in for a small profit while anything under $70 will automatically lose your money. Depending on the information you have or how confident you feel, you might buy several binary options to improve your winnings (or increase your losses!).
Are Binary Options Scams?
Despite the niche having good intentions at first, this was seen when they were approved back in 2008, they’re now a hub for scammers. According to the FBI, over $10 billion is stolen each and every year through binary options and the scammers are only getting more adventurous with their schemes. Just recently, they used Sir Richard Branson’s name in an attempt to convince people into purchasing fake investments.
While reading this, you might be wondering how it’s allowed to happen and it’s actually a story of two halves. On the one side, we have binary options that are listed on registered exchanges and this means they’re regulated by the Commodity Futures Trading Commission (CFTC) and numerous other entities. However, the problem arises online because the majority of the industry uses websites that aren’t regulated by US authorities and don’t comply with the regulations. For some of these unregulated websites, they’re being controlled by criminals all around the world as they commit fraud.
For the first three years, binary options were a serious investment idea and many chose to put their money into this niche. In 2011, however, things started to turn when the Internet Crime Complaint Center (IC3) received four complaints from victims who had lost a combined $20,000. Today, in 2017, as we’ve already seen, this number is in the billions and thousands of lives are being affected on a yearly basis. In many countries across Europe, they believe that binary options account for around one-quarter of all fraud complaints which shows you how they now dominate fraud issues all around the world.
How Do the Scams Work?
Are binary options scams? Well, we’re going to provide you with some advice on how to avoid the scams a little later but first, we want to explain how the scams work. For the most part, the scam artists are located overseas and they only have one goal; to take as much of your money as possible. In recent years, they’ve achieved this through three different techniques;
For some binary options websites, they send an email or message saying the government needs photocopies of utility bills, credit cards, driver’s license, passport, and various other pieces of personal information. Unfortunately, some people fall for this trick as soon as they see the word ‘government’ and the information they provide gives the scammers enough to drain their bank account within seconds.
Lack Of Refund Or Earnings
Elsewhere, other binary option companies will refuse to give a refund or the earnings to their customers. For the customer, all will be going well until they try to withdraw money only to find the request has been denied. From here, the customer support becomes impossible to use because emails and phone calls are ignored. In some cases, we’ve seen accounts frozen while the company themselves accuse the customers of fraud.
Trading Software Manipulation
While they promise to do their best on the surface, some trading platforms such as this will change the algorithms of their programs to purposely create a loss for all those investing in their service. By changing payouts and prices, losing trades are generated and the consumer simply feels as though it wasn’t to be when they’ve actually been conned out of money. For example, a common tactic is to extend the expiration time on all winning trades until they’re in a losing position.
When answering the question of ‘are binary options scams’, perhaps we should actually ask ‘are ALL binary options scams’ instead. If this were the case, we could come to an answer of ‘no’. In the market, there are still legitimate services trying their best in shark-infested waters. To finish, we want to provide you with some advice for finding real brokers.
When we say ‘research’, we really mean research (like you’ve never done before). Rather than looking for brokers on Google and then trusting everything the website says, open the second tab and see what people are saying about the company. If you read nine reviews and eight of them are negative, chances suggest you won’t enjoy your experience. If you type in the broker’s name with ‘scam’ into a search engine, you should see any complaints that have arisen. If it’s clear, you can be confident but we have another step to be sure.
Secondly, only choose a broker from countries that have a strong regulatory system in place. At all times, you need to know that the company is being regulated otherwise they could be doing anything with your money. As we’ve seen, the US uses the Securities and Exchange Commission while the UK market is regulated by the Gambling Commission. If you’re choosing a company from a country with no regulation, you’re risking your investment since we’ve already discovered the number of overseas scammers in this corner of the market.
Are binary options scams? Yes and no. Compared to other niches, there are significantly more scams in binary options and it makes the whole process a minefield. Although you will find legitimate services using the two tips above, we believe there are much better (and safer!) ways to make money online!
I hope you enjoyed this post and if you have any questions about Binary Options or you just want to leave your own personal experience with Binary Options, leave a comment below. I would love to hear from you!