Why You Should Not Trade Binary Options

Much of the binary options market operates through Internet-based trading platforms that are non necessarily complying with applicable U.S. regulatory requirements and may be engaging in illegal activity. Investors should be aware of fraudulent promotion schemes involving binary options and binary options trading platforms.

What is a Binary Choice?

A binary selection is a type of options contract in which the payout depends entirely on the consequence of a yes/no proposition and typically relates to whether the price of a particular asset volition ascent to a higher place or fall below a specified amount.  Once the option is acquired, at that place is no further decision for the holder to brand regarding the exercise of the binary option considering binary options practise automatically.  Unlike other types of options, a binary pick does not give the holder the right to buy or sell the specified asset.  When the binary selection expires, the option holder receives either a pre-determined corporeality of cash or nothing at all.

Investor Complaints Relating To Fraudulent Binary Options Trading Platforms

The SEC has received numerous complaints of fraud associated with websites that offer an opportunity to purchase or trade binary options through Internet-based trading platforms.  The complaints fall into at least three categories:

1. Refusal to credit customer accounts or reimburse funds to customers

These complaints typically involve customers who have deposited money into their binary options trading account and who are then encouraged by "brokers" over the telephone to eolith additional funds into the client account.  When customers afterwards attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly cancel customers' withdrawal requests, pass up to credit their accounts, or ignore their telephone calls and emails.

2. Identity theft

These complaints criminate that sure Internet-based binary options trading platforms may be collecting client data (including copies of customers' credit cards, passports, and driver's licenses) for unspecified uses.  Do non provide personal information.

3. Manipulation of software to generate losing trades

These complaints allege that the Internet-based binary options trading platforms dispense the trading software to distort binary options prices and payouts.  For example, when a customer's trade is "winning," the countdown to expiration is extended arbitrarily until the merchandise becomes a loss.

Beware of Overstated Investment Returns for Binary Options

Additionally, some binary options Cyberspace-based trading platforms may overstate the average return on investment by advert a higher average return on investment than a customer should expect, given the payout structure.

For instance, a client may exist asked to pay $50 for a binary option contract that promises a fifty% return if the stock price of XYZ company is above $5 per share when the option expires.  Assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actuallynegative, resulting in anet loss to the client.  This is considering the consequence if the selection expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain).  In this example, an investor could await -- on average -- to lose money.

Always Check the Background of a Firm or Fiscal Professional person

Before investing, check out the background, including registration or license condition, of whatsoever firm or financial professional yous are considering dealing with through the SEC's Investment Adviser Public Disclosure (IAPD) database, bachelor on Investor.gov, and the National Futures Association Background Affiliation Status Information Middle'south BASIC Search.  If you cannot verify that they are registered, don't merchandise with them, don't give them any coin, and don't share your personal information with them.

Additional Information

Investor Alarm: Don't Invite Investment Scams to Discover You lot

Investor Warning: Binary Options Websites may be Used for Fraudulent Schemes

Investor Alert: Beware of Government Impersonators Targeting Fraud Victims

Investor Alert: Binary Options and Fraud

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The Office of Investor Instruction and Advocacy has provided this information equally a service to investors.  It is neither a legal estimation nor a argument of SEC policy.  If you have questions concerning the pregnant or awarding of a particular police or rule, please consult with an attorney who specializes in securities constabulary.

Why You Should Not Trade Binary Options,

Source: https://www.investor.gov/protect-your-investments/fraud/types-fraud/binary-options-fraud

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