Can You Lose Money In Binary Options

Much of the binary options market place operates through Net-based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements and may exist engaging in illegal action. Investors should be enlightened of fraudulent promotion schemes involving binary options and binary options trading platforms.

What is a Binary Option?

A binary option is a blazon of options contract in which the payout depends entirely on the consequence of a yes/no proposition and typically relates to whether the cost of a item nugget will rise above or fall below a specified amount. Once the option is caused, there is no further decision for the holder to make regarding the exercise of the binary option considering binary options practice automatically. Unlike other types of options, a binary option does non requite the holder the right to purchase or sell the specified asset. When the binary option expires, the option holder receives either a pre-adamant corporeality of cash or zero at all.

Investor Complaints Relating To Fraudulent Binary Options Trading Platforms

The SEC has received numerous complaints of fraud associated with websites that offering an opportunity to buy or trade binary options through Internet-based trading platforms. The complaints fall into at to the lowest degree 3 categories:

Refusal to credit client 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 past "brokers" over the telephone to deposit additional funds into the customer account. When customers afterwards attempt to withdraw their original deposit or the return they have been promised, the trading platforms allegedly abolish customers' withdrawal requests, decline to credit their accounts, or ignore their phone calls and emails.

Identity theft

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

Manipulation of software to generate losing trades

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

Beware of Overstated Investment Returns for Binary Options

Additionally, some binary options Internet-based trading platforms may enlarge the average render on investment by advert a higher boilerplate return on investment than a client should expect, given the payout structure.

For example, a customer may exist asked to pay $50 for a binary option contract that promises a 50% render if the stock price of XYZ visitor 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 render on investment is actuallynegative, resulting in anet loss to the customer. This is because the result if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the choice expires in the coin (approximately a 50% proceeds). In this example, an investor could expect -- on average -- to lose money.

E'er Check the Background of a Firm or Financial Professional person

Earlier investing, check out the background, including registration or license status, of any firm or fiscal professional y'all are considering dealing with through the SEC's Investment Adviser Public Disclosure (IAPD) database, available on Investor.gov, and the National Futures Association Background Affiliation Status Information Center'due south Bones Search. If you lot cannot verify that they are registered, don't merchandise with them, don't give them whatsoever coin, and don't share your personal information with them.

Boosted Information

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Investor Alert: Binary Options and Fraud

The Office of Investor Pedagogy and Advocacy has provided this data as a service to investors. Information technology is neither a legal interpretation nor a statement of SEC policy. If you take questions concerning the meaning or application of a particular law or rule, please consult with an chaser who specializes in securities police.