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Scams using binary options are unfortunately quite common, as you can tell from our list of fraud brokers and services. If you are concerned about falling prey, this guide explains how to avoid scams in the UK.
Are Binary Options a Scam?
In short, no. Binaries are, in our opinion, a good product. There are, however, unscrupulous brokers and other service providers out there preying on uninformed traders. This is due to binaries being largely unregulated and unmonitored when they first came to the market – which thankfully has changed a lot in recent years. But with scam artists still out there, what can consumers do to avoid a binary options scams and focus purely on their trading? Read this tutorial on scams and only trade with trusted brokers!
A scams list may not actually be that useful though – operators are closing and re-opening so often that maintaining the list becomes a full time job. A better choice for consumers is to spot the warning signs, and if there are any doubts at all – simply move on to another provider. A list of scams can only protect you from threats that exist today – learning how the con artists operate and mislead consumers can keep you safe for years to come.
There are a number of methods by which the scams associated with binary options will try and make money. There are however, also some pretty obvious red flags that can pre-warn consumers that all might not be well. As ever, the old adage “If something seems too good to be true, it probably is” applies. If you have encountered any of the below, I would advise treading very carefully – and if in any doubt, leave that particular broker – there are plenty of legitimate, trustworthy brokers. There is no need to take risks with any company that you may have doubts over.
Top 3 Trusted Brokers
For those that simply want to avoid scams and start trading without reading this whole guide, go with any of these brokers:
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A service called MyChargeBack.com offer a consultancy service to help victims recover their money. They offer a free service to let you know if you have a case. Things like unpaid withdrawals, or unauthorised payments can be claimed via banks or credit card companies, and this firm specialise in dealing with those organisations. The range of services varies based on each case, but they may be able to help:
How to Avoid Scams
Look out for the warning signs listed below!
A reputable broker is unlikely to solicit new business by making cold calls and phoning you out of the blue. It is likely that any call made in this way, will involve unrealistic claims about binary options, and potential profits to be gained from trading them. These might include the promise of immediate, high returns, and downplaying any risk.
In addition to telephone calls, some operators may also email directly, in some cases, suggesting an account has already been opened. Any of these methods of getting in contact is an immediate warning sign. Hang up, and delete any mails.
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One source of frequent issues is via deposit bonuses. Dishonest brokers will often have some extremely unethical terms. These might include tying in the initial deposit until a certain amount of trades have been met (turnover requirements). They will include the initial deposit (not just bonus funds). Effectively making the deposit their money as soon as it is handed over. Be sure to read these terms before taking a bonus, or making a deposit.
This warning includes automated robots and signals, but also managed accounts, where an account manager has promised massive profits. There is an obvious conflict of interest for these account managers. If you make a long term profit, the brokerage makes a long term loss on your account. An account manager, employed by the broker, is very unlikely to have your trading interests at heart. While they may argue otherwise, letting someone else trade for you is very likely to end in losses. These managers can also encourage traders to invest way beyond their means, which is particularly dangerous. Binary options are a high risk / high reward investment. The risks should never be hidden from you by your broker or account manager.
‘Make Money Online’ marketing
Many of these warning signs are related – this form of marketing again hides the risks – just like the cold callers and account managers. The “Make money online” and “Get rich quick” marketing surrounding binary options is grossly irresponsible. There are numerous websites, with high production videos that look very appealing. They will suggest making money is easy, possibly even suggesting they copy famous investors. These are all scams. Any promotion that hides, or downplays, the high risk nature of binary trading is not being honest. Binary options are not a way to make easy money, and should not be sold this way. This form of advertising for binary options is generally the most dangerous for the consumer. If you encounter marketing of this kind, do not proceed.
A funnel is a website that will drive traffic to a broker. As a visitor to that site, you may not even be aware you have been redirected to a broker. These funnels generally operate the “get rich” marketing described above, but not always. The issue here is that the consumer will be passed to a broker, who they know nothing about. Having visited the funnel, the new customer will get a call from a random broker asking for a deposit. While this may sound odd to those who have not fallen victim to it, the effective selling of the binary options scam by the funnel website, will mean many people are duped.
Some brokers will include a line within their terms along the lines of: “Our prices may not reflect those of the actual market”. Unfortunately it will not be worded as clearly as that, as the implications are obvious – they set their own prices. If the broker is the counter party to any trade, and they also set the prices, it will be very very difficult to ever make a profit with that broker. Clients are trading against the broker, and they decide the closing prices. One of the two parties will make a loss – and it will not be the broker. Research the terms of trading and beware of any references to settlement figures based on anything other than real world prices.
So those are some key warning signs that should make any potential new trader stop and question what they are being told. If you have come across any of the above, identify the broker involved – and trade elsewhere.
In addition, new traders might try and carry out their own ‘due diligence’ on a brand. Even this however, might carry risk. The reason is, as well as the scam operators, there are review sites that are also dishonest. There are a couple of ways that consumers can protect themselves and find the trustworthy reviews. The first method is in looking at the offerings elsewhere on the review site – if other scams are being promoted, then the reviews are not credible. Ask these question of the site:
- Is there a proliferation of robot ads?
- Are there promises of high returns?
- Is there adequate risk disclosure?
- Can you contact the site, or site owners?
The second method is regulation. In the UK, the Financial Conduct Authority regulates some binary options brokers. This only happens where the broker offers a form of trading already covered by FCA regulation – Contracts for Difference (CFDs) for example.
The reason this is important is because FCA regulated firms have to be careful about who promotes them too.
If a binary option site lists FCA regulated brands (as we do!), this indicates a level of credibility and protection. That site must be completely honest about the high risk nature of binary options, and it must have accountable individuals, based in the UK who operate it. If it does not, then the FCA firms would not allow their brands to be marketed by them.
Here however, is another level of complexity. Some binary options brokers have sought to register with the FCA. This is not the same as being regulated by them. In order for a firm to be regulated by the FCA, they need to offer additional forms of trading, not just binaries. A brand offering only binary options will not be fully regulated by the FCA. This is because binary options are currently regulated and licensed by the UK Gambling Commission. So the list of binary options brokers regulated by the FCA is actually very small.
FCA List of Unauthorised Brokers
In addition to the services below, the FCA have published a list of firms who are not authorised to trade binary options in the UK. While stopping short of calling them scams, the list provides a picture of firms who are prepared to break the law (by offering unregulated trading). They are almost certainly best avoided. The list can be found here:
The Brit Method
The marketing in use here is an obvious red flag. Videos that suggest over £500k has been made in under a month are about as obvious as it gets. Unfortunately the claims are not true. This is an outright scam, avoid the “Brit Method” or any associated schemes. These include “Jason Taylor” and any “millionaire maker” scheme linked to that name, or the Brit Method.
The Brit Method is a scam that has been used before. Here is what you need to know to protect your money;
What Is The Brit Method?
The Brit Method promises to be a binary options trading strategy that can make you hundreds of thousands of Dollars within a few weeks. Unfortunately, it is the latest reiteration of an old scam.
The Brit Method is nothing new. It previously was called the Aussie Method and the Canuck Method, and each time the site had to close due to its bad reputation. Even the guy who supposedly invented the genius trading style is the same.
It is always the same stock picture, just the name changed from Jake Mason to Jake Pertu and now Jason Taylor.
There are many fake testimonials on the website, but make no mistake all of them are made up statements with stock pictures of people who never heard of the method.
Similarly, all the promises made by the Brit Method are lies. The site essentially promises immediate, unlimited gains, but provides little information on how it wants to accomplish this goal.
The site also promises to get you started for free, which is a lie, too. After you complete your free registration, you are refused access to the system unless you deposit $350. But even if you make the deposit, you still wont have access because there is no system. The money is gone, and you will never see it again.
Avoid the Brit Method at all costs. Also, be aware of all future version of the scam. In all likeliness, there will be a German Method and an American Method and they will very likely to use exactly the same methods to con people.
Again, the sales pitch is an obvious red flag. This is a scam, stay away.
The scam suggests that clients can enjoy wealth by following a method created by Warren Buffet. An investor famous for taking long term positions, this fraud has absolutely no connection with Buffet himself.
The process involved visitors being forced to join a particular broker (another scam tactic explained above) and make a deposit in order to get access to a “system”. No system exists, and traders will not get any funds returned. Avoid.
The good news here is that the Ultimate4Trading website has been blocked for UK visitors. The operation is dishonest and should be avoided.
Another scam which again, is thankfully blocked in the UK. Once again, the promise to “get rich” is at the forefront of the marketing but the whole operation is a scam. To the point which even the website is now a haven for malware. Keep away.
Instagram & Facebook
Many scams promote themselves on Instagram and Facebook. Most will fall into the categories listed above. The mainstream media have also been duped themselves in the past, including the Daily Mail. These promotions or accounts make wild claims of the profits that can be made, backed up with images of flash cars and other trappings of success. It is all a lie and these operations are to be avoided at all costs. If these people really could turn your £2,000 into £8,000 in a week – why would they need to advertise on social media? They could simply make as much money as they needed from the markets and go and spend their time on the beach. Screenshots are easy to fake – and they never need to show the losing trades.
Anything promoting a ‘get rich quick’ route using binary options is untrustworthy, full stop. Remember also that Martin Lewis (of MoneySuperMarket fame) is considering legal action because Facebook are not doing enough to remove ads claiming to be backed by him. To repeat his quote “Martin Lewis does not do ads“. If an advert mentioned him, avoid it at all costs – it is almost certainly a scam.
Below are some brokers for which we have received credible reports of poor customer care, or worse. Again, many of the tactics used are covered in our article on avoiding scams – this list is unfortunately not exhaustive so if any of the actions below sound similar to other brokers you have come across, stay away from them – and let us know.
Many of the worst brokers have been thankfully shut down, but always be aware of using unregulated brands unless you are able to verify their quality. Not all unregulated brands are untrustworthy, but it does mean more ‘due diligence’ is necessary.
Bonus terms lock in the initial deposit until turnover requirements of x30 are met. Your deposits are yours until you choose to trade them. A broker should not block withdrawals of your deposits before it has even been traded. Avoid.
Opteck have now closed for business. The tighter regulations introduced by CySec (who monitored Opteck) have left the firm with no option but to cease trading. Increased regulation is helping the industry by squeezing out the firms that used misleading marketing, or deception, to earn money from clients.
Boss Capital were a popular broker which accepted US traders. A lack of strong regulation enabled them to operate using questionable methods. They are another firm that have closed as a result of improved regulation.
StratX were a firm brought to our attention by a disgruntled customer (see the testimonial page). The firm use cold calls, account managers and make withdrawals very difficult. Not recommended.
Another firm we have received much correspondence regarding is CFDStocks. They employ most of the tactics discussed above, including cold calls. Most contacts we received say an account manager encouraged larger and larger deposits before disappearing.
Binary Options – Get Your Money Back!
Binary Options Refund
The binary options industry has seen better days after the once-promising marketplace has been largely revealed to be full of fraud and scams. For traders who still prefer to trade binary options, this means navigating a tough marketplace that’s fraught with perils, and sometimes having to deal with the unfortunate reality of being scammed. With lawsuits that range from tens to hundreds of millions for fraudulent binary options executives, it can be disheartening if you’ve traded on the market.
If you’ve lost money on binary options scams and fraud attempts, it may seem impossible to reach these companies, and when you do it can feel even harder to get anywhere. From obtuse rules and regulations to fine print that no one can read, binary options companies make it difficult to get your way. Fortunately, there are ways you can stay ahead of these companies and be aware of scams before they unfold. In cases where that’s not possible, you can always explore services like PayBack to help expedite and simplify the process. Read on to learn about the worst binary options scams, and how you can stay safe even in the direst situations.
Binary Options Scams – How We Can Get Your Money Back
Dealing with many binary options platforms’ customer support and legal departments can be a nightmare even for the most well-versed traders. Companies that run scams are not always happy to extend channels for clients to reach them, and if they do, they’ll make it hard to actually get anywhere. Fortunately, PayBack can help you navigate the murky waters of recovering your money back from scammers and fraudulent binary options companies. From collecting information and gathering the required documentation to confronting companies for your funds, PayBack can facilitate the restitution process you deserve.
Even so, it pays to know what a binary options scam looks like to avoid it better in the future:
Scam Trading Accounts: This is one of the most common scams in binary options, and though it varies between scammers, it follows similar steps:
- You land on a website that looks legitimate and says all the right things including unusually high return rates (“Up to 100% ROI!”)
- You’re asked for an initial deposit to start trading, after which you’re given a “bonus” and make a few successful trades. If you want to withdraw, you’re told you’ll need to make over your “bonus” to start seeing returns.
- If you lose, you’ll get a call from a “senior broker” who asks that you up your deposit to make sure you can “take advantage” of an opportunity, which will promptly move out of your favor. Trading Bonuses: This is related to other scams, but it is dangerous enough to warrant its own mention.
- When you sign up for a binary options broker, you may receive a “bonus” into your trading account, a generous sum that’s seemingly free money.
- To withdraw it, you’ll be required to clear some outlandish threshold (trade the entire bonus over a specific limit or trade up to X times your bonus amount).
- Before you ever reach the limit, you’ll have lost your actual money attempting to reach it.
Broker managed accounts: When you sign up, sometimes binary options firms will offer a “managed” account that lets “professional ex-Wall Street veterans” trade on your account with hard-to-pass promised returns. The caveat is that they require a significant upfront deposit, and have money locked up. This means you don’t control your money or your account. Trading Software: Sometimes you’ll see an offer for “revolutionary trading tools” that can take you from a newbie to a seasoned pro with a few clicks. However, it will likely take your money and either scalp to inflate its success rate, or simply lose it. Either way, you’re losing money as brokers are raking it in.
Withdrawal or platform issues: This seems innocuous at first, with platforms apologizing to customers who can’t withdraw their earnings. However, when clients try to get their earnings though support, they’re asked for an unreasonable burden of proof or other requirements, and in many cases simply vanish, leaving burned traders in the lurch.
Even with all the risks that abound across the sector, you can still navigate it safely if you’re careful. There are always warning signs that you can look for, and steps you can take to protect yourself from binary options scams. Here are some of the important aspects to search out to avoid being scammed:
Avoid returns that seem too high to be reasonable. Even the best traders in the world have returns that seem too bad to be true. Most professional traders are lucky to generate anywhere from 10% to 15% ROI annually, and brokers that offer significantly higher returns are likely lying. If websites can’t tangibly support their claims, it’s definitely too good to be true.
Consider any cold approach by “brokers” over the phone or email suspiciously. Cold calling is one of the most used plays in binary options to onboard new customers. Usually, callers will present themselves as “seasoned” or “expert” former Wall Street veterans and make claims that sound amazing but are hard to prove after the fact. Always ask for more information or ask to get called back after you’ve had a chance to do your own research first.
Check any company you’re thinking of giving money to carefully, and against regulators’ white lists. Most regulators around the world keep detailed lists of brokers and companies that are known to be fraud and scam risks. You don’t need to get a full financial history of the company, but knowing if they’re regulated in your country, and whether they’re considered safe is a good way to avoid being scammed.
Understand the difference between financial trading and binary options. This may seem basic, but it’s worth noting that binary options are not the same thing as buying shares or other instruments. Instead, you’re betting on whether the asset will move above or below a set price. Many people are fooled into believing they’re trading real assets, when they’re instead being taken in by scammers.
Binary options are very risky for most retail traders and can open you up to a variety of scams and fraud attempts. If you’ve fallen victim to one, however, you don’t need to start panicking just yet. Using services like PayBack make it easier to recover your money and gain some closure. Building a strong understanding of how these scams work can also help. Keep an eye out for the obvious red flags, and make sure to keep clear records of all your interactions to ensure your interactions are safer than they might otherwise be when trading binary options.
What You Need To Know About Binary Options Outside the U.S
What Do You Need To Know About Binary Options Outside the U.S?
Binary options let traders profit from price fluctuations in multiple global markets, but it’s important to understand the risks and rewards of these controversial and often-misunderstood financial instruments. Binary options bear little resemblance to traditional options, featuring different payouts, fees, and risks, as well as a unique liquidity structure and investment process.
Binary options traded outside the U.S. are also structured differently than those available on U.S. exchanges. They offer a viable alternative when speculating or hedging but only if the trader fully understands the two potential and opposing outcomes.
The Financial Industry Regulatory Authority (FINRA) summed up regulator skepticism about these exotic instruments, advising investors “to be particularly wary of non-U.S. companies that offer binary options trading platforms. These include trading applications with names that often imply an easy path to riches.”
- Binary options have a clear expiration date, time, and strike price.
- Traders profit from price fluctuations in multiple global markets using binary options, though those traded outside the U.S. are structured differently than those available on U.S. exchanges.
- Non-U.S. binary options typically have a fixed payout and risk, and are offered by individual brokers rather than directly on an exchange.
- While typical high-low binary options are the most common type of binary option, international brokers typically offer several other types of binaries as well.
Binary options outside the U.S. are an alternative for speculating or hedging but come with advantages and disadvantages. The positives include a known risk and reward, no commissions, innumerable strike prices, and expiry dates. Negatives include non-ownership of the traded asset, little regulatory oversight, and a winning payout that is usually less than the loss on losing trades.
Understanding Binary Options Outside the U.S
What Are Binary Options?
Binary options are deceptively simple to understand, making them a popular choice for low-skilled traders. The most commonly traded instrument is a high-low or fixed-return option that provides access to stocks, indices, commodities, and foreign exchange.
These options have a clearly stated expiration date, time, and strike price. If a trader wagers correctly on the market’s direction and price at the time of expiration, they are paid a fixed return regardless of how much the instrument has moved since the transaction, while an incorrect wager loses the original investment.
The binary options trader buys a call when bullish on a stock, index, commodity, or currency pair, or a put on those instruments when bearish. For a call to make money, the market must trade above the strike price at the expiration time. For a put to make money, the market must trade below the strike price at the expiration time.
The broker discloses the strike price, expiration date, payout, and risk when the trade is first established. For most high-low binary options traded outside the U.S., the strike price is the current price or rate of the underlying financial product. Therefore, the trader is wagering whether the price on the expiration date will be higher or lower than the current price.
Binary Options Outside the US
Foreign Versus U.S. Binary Options
Non-U.S. binary options typically have a fixed payout and risk and are offered by individual brokers rather than directly on an exchange. These brokers profit from the difference between what they pay out on winning trades and what they collect on losing trades. While there are exceptions, these instruments are supposed to be held until expiration in an “all-or-nothing” payout structure.
Foreign brokers are not legally allowed to solicit U.S. residents unless registered with a U.S. regulatory body such as the Securities and Exchange Commission (SEC) or Commodities Futures Trading Commission (CFTC).
The Chicago Board Options Exchange (CBOE) began listing binary options for U.S. residents in 2008. The SEC regulates the CBOE, which offers investors increased protection compared to over-the-counter markets. Chicago-based Nadex also runs a binary options exchange for U.S. residents, subject to oversight by the CFTC.
These options can be traded at any time, with the rate fluctuating between one and 100, based on the current probability of the position finishing in or out of the money. There is full transparency at all times and the trader can take the profit or loss they see on their screen prior to expiration.
They can also enter as the rate fluctuates, taking advantage of varying risk-to-reward scenarios, or hold until expiration and close the position with the maximum gain or loss documented at the time of entry. Each trade requires a willing buyer and seller because U.S. binary options trade through an exchange, which makes money through a fee that matches counter-parties.
High-Low Binary Option Example
Your analysis indicates the Standard & Poor’s 500 index will rally for the rest of the trading day and you to buy an index call option. It’s currently trading at 1,800 so you’re wagering the index’s price at expiration will be above that number. Since binary options are available for many time frames—from minutes to months away—you choose an expiration time or date that supports your analysis.
You choose an option that expires in 30 minutes, paying out 70% plus your original stake if the S&P 500 is above 1,800 at that time or you lose the entire stake if the S&P 500 is below 1,800. Minimum and maximum investments vary from broker to broker.
Say you invest $100 in the call that expires in 30 minutes. The S&P 500 price at expiration determines whether you make or lose money. The price at expiration may be the last quoted price, or the (bid + ask)/2. Each binary options broker outlines their own expiration price rules.
In this case, assume the last quote on the S&P 500 before expiration was 1,802. Therefore, you make a $70 profit (or 70% of $100) and maintain your original $100 investment. If the price finished below 1,800, you would lose your original $100 investment.
If the price expires exactly on the strike price, it is common for the trader to receive her/his money back with no profit or loss, although brokers may have different rules. The profit and/or original investment is automatically added to the trader’s account when the position is closed.
Other Types of Binary Options
The example above is for a typical high-low binary option—the most common type of binary option—outside the U.S. International brokers will typically offer several other types of binaries as well.
These include “one-touch” options, where the traded instrument needs to touch the strike price just once before expiration to make money. There is a target above and below the current price, so traders can pick which target they believe will be hit before the expiration date/time.
Meanwhile, a “range” binary option allows traders to select a price range the asset will trade within until expiration. A payout is received if price stays within the range, while the investment is lost if it exits the range.
As competition in the binary options space heats up, brokers are offering additional products that boast 50% to 500% payouts. While product structures and requirements may change, the risk and reward is always known at the trade’s outset, allowing the trader to potentially make more on a position than they lose. Of course, an option offering a 500% payout will be structured in such a way that the probability of winning the payout is very low.
Unlike their U.S. counterparts, some foreign brokers allow traders to exit positions before expiration, but most do not. Exiting a trade before expiration typically results in a lower payout (specified by broker) or small loss, but the trader won’t lose their entire investment.
The Upside and Downside
Risk and reward are known in advance, offering a major advantage. There are only two outcomes: win a fixed amount or lose a fixed amount, and there are generally no commissions or fees. They’re simple to use and there’s only one decision to make: Is the underlying asset going up or down?
In addition, there are also no liquidity concerns because the trader doesn’t own the underlying asset and brokers can offer innumerable strike prices and expiration times/dates, which is an attractive feature. The trader can also access multiple asset classes anytime a market is open somewhere in the world.
On the downside, the reward is always less than the risk when playing high-low binary options. As a result, the trader must be right a high percentage of the time to cover inevitable losses.
While payout and risk fluctuate from broker to broker and instrument to instrument, one thing remains constant: losing trades cost the trader more than they can make on winning trades. Other types of binary options may provide payouts where the reward is potentially greater than the risk but the percentage of winning trades will be lower.
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