How to Avoid Fraud in Binary Options Trading
Binary options trading has experienced a recent popularity surge, and as a result new online trading sites for binary options are turning up practically every day. Binary options trading is different from other more conventional types of investments, but are still subject to laws governing the buying and selling of assets such as securities and commodities. Unfortunately, many online binary options trading sitesare not registered with any government regulatory or supervising body and as such may not be compliant with federal laws and regulations. More importantly, however, they may be avoiding government regulation in order to take advantage of you. This article will help you arm yourself against the most common types of binary options fraud.
What is binary options trading?
Binary options are based on a simple yes/no call: will the value of ABC be at $x or higher at a specified time and date? If the investor believes that the value of the asset will exceed the specified value when the option expires at the specified time and date, he will buy the binary option at the “bid price” (meanwhile, someone else is selling the option at the “ask price”). Before any buying or selling takes place, there is a pre-determined payout for the investor if he is correct in his prediction. For example, let’s say an investor has the option to buy in at $53.00, and the payout is a potential $100. If he is correct when the binary option expires, he will earn the $100 payout and make a net profit of $47.00 (in the money). If he is incorrect, however, he will lose all of the money he invested in the option and be $53 in the red (out of the money).
Common binary options online scams
There are three types of complaints that the main regulatory bodies, the SEC and CFTC, receive quite often about unregistered and unregulated binary options trading sites. The first way that fraudulent binary options sites will scam their customers is by refusing to credit them after a winning trade, while stealing the money that was invested. The second type of binary options scam is luring you in with the promise of big investment gains while actually stealing your identityand personal information. And lastly, some online binary options sites may use software to manipulate the trades so that their customers lose more often than they should.
How to avoid binary options scams
You have to do a bit of homework to ensure you and your money stay safe when you are investing in binary options. You first need to check that the binary options site is registered with one of the proper regulatory bodies:
Lastly, and this is useful for traders in all markets, you need to confirm the registration status and background of the bróker, brokerage, investment firm or financial professional you are going to invest your money with.
FINRA BrokerCheck: www.finra.org/investors/toolscalculators/brokercheck/
BASIC Search: www.nfa.futures.org/basicnet
If you can’t find your trading site registered with a regulator body or can’t confirm their status via one of the brokerage search tools, don’t invest any money with them and don’t share any personal information with their site.