The problem with binary options trading!

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Marker - Certified Professional
Rank: Orangutan | banana points 320

A fair bit of spotlight/scrutiny has been placed on binary options in the past years, with warnings issued from central banks such as the MAS (MAS-Cautions-Investors-on-Risks-in-Trading-Binary-Options-with-Unregulated-Platforms, SEC warns against Binary Options and scams such as the-wolves-of-tel-aviv-israels-exposed.

Likewise, we hope to take this chance to educate investors on this highly risky investment product and advise everyone to think twice before hopping on this bandwagon.

What are Binary Options?

For those who might have chanced upon a Binary trading advert or some sort of get rich scheme, you might be familiar with the below:

Trading with Binary options is to predict whether a stock, or an index, or a commodity or a forex pair, would go up or down within a certain time frame.

Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time?

Correct, you are NOT actually buying anything, you don't wait for something to go up and sell at a profit, not at all. You invest in putting down an option that, for example OIL, will have increased in price by the time your option expires, or the other way around, that it will close lower.

If you are right, you will make a profit of 65-90% on your invested amount.

These option time frames can be as little as 30 seconds, to 2 minutes, to 15 minutes, to 1 hour, .... It all depends on what you chose.

Is it a scam?

Short answer is yes & no.

In fact, it is not a scam when u consider that Binary options are in fact about as legitimate as your roulette wheel or soccer betting. Also, Binary options are simple to digest and much easier to peddle as a "transparent trading instrument", thus attributing to its popularity.

However, very often, you end up taking the other side of the market as your broker, i.e. If you win, the broker loses and vice versa. This creates a skewed conflict of interest and their ability to adjust the payout ratio (Odds/multiplier) amplifies that.

The Scam

The scam comes in when certain brokers get greedier and you start seeing instances like refusal to credit customer accounts or reimburse funds to customers; identity theft; and manipulation of software to generate losing trades.

Do not trade Binary Options.

Long story short, you have no business dabbling with binary options. You run the risk of dealing with an illegitimate broker and even if you manage to find a proper broker, you end up facing insurmountable house odds with negative expected value.

If the gambling bug bites, you might just be better off playing the lower house edge games in the casino like baccarat or blackjack.

In conclusion, there is no quick and easy money to be earned. Instead, do your homework and read.
Good luck.

Comments (45)

Apr 30, 2017

Didn't read the whole post, only the conclusion.

I've sold structured products that had a binary content to them. Some large funds trade them. It's an investment with associated risks like any other. Sure some people might try to rip your eyeballs out in the retail market but otherwise all good..

Mar 31, 2018

Futures and Options are the same thing, just betting on movement (but by definition, you have the right to delivery/right to 100 shares yadda yadda) but we all know no one actually does that. Just a nice way around the definition of gambling.

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Best Response
Mar 31, 2018

P&D, I would respectfully disagree that options trading is nothing more than structured gambling, if that is your position.

I've been an active options trader for many years, but even though I have a level 4 options trading clearance w/my brokerage account, IRAs allow for only level 1 (2 at some institutions). Level 1 meaning I can buy/sell calls/puts. Period. Level 4 allows me the ability to trade calls, puts, spreads, straddles, strangles, condors and a few other strategies. However, I keep my strategies pretty simple, keep my timeframes to weeklys or monthlys, and I use my strategies to get into a position at a cost below the CMV (by collecting premium to lower my cost basis if I'm getting assigned shares by selling puts), or by liquidating a position for above CMV by collecting premium by selling calls). Also, I like to sell straddles around earnings season, when I anticipate increased volatility. I don't like LEAPS simply b/c it ties up my excess capital for too long.

Trading options isn't for everyone, but they are a valuable, powerful tool when used properly. On the flip side, they can be monetary weapons of mass destruction when used improperly. The OCC (Options Clearinghouse Corp) is an excellent resource for those who want to trade options to start out. They used to have mock accounts that would allow people to practice w/o using real money. Don't know if they still allow for that, but I found some valuable tools on the site that I hadn't found in a number of books I've read on the topic.

Long-winded post I know. I'm pretty passionate about the practice, though. I have not come out on the winning side of every options trade, but all-in-all, I've done quite nicely, often times picking up anywhere from $300 - $2300 in a week without actually liquidating a single share in my portfolios.

Mar 31, 2018

I started out with options, I lost some doing stupid stuff with SPX weeklies (that's not why I said what I said in my post above) but made all of it back and then some by simply doing directional vertical spreads. Keeps the theta low, low cost upfront, and if you have a measured move you can adjust your strike legs accordingly and up your RR ratio. Some strats are really cool and can even do for income (ie covered calls)! I actually don't hate options, I just found I was doing great with directional plays so just went with futures. No theta decay, no expiration. I didn't need to wait at expiration for my max profit. The money you can make in a 20 point day in /ES is vastly different than a 20 point out spread on SPX, very wide in terms of profit.

Just by reading that you keep your time frame to weekly and monthly already shows you know what you're doing 100% (doesn't mean a lot coming from me lol). Unfortunately this isn't the case for 95% of traders. Most do options for the massive leverage, and doubt they even care about the whole "right to 100 shares @ a specific strike @ a specific date," or any of the strategies that you have mentioned. There was a report I read, most option-traders blow up because they buy super low expy options, they are just betting on the direction in such a short time frame, similar to binary options. In other words, they get stuck on the level 1 approval, lol.

That's awesome to hear, I seen your other posts, and I always love speaking to those who have been in the trading game for a while. I've only been in the game for around a year now, and I love it. Still very young but can't wait to see if I can emulate what I've learn and applied to a much larger account size. I personally believe that the market is simple, and the people who win are those who don't overcomplicate it.

EDIT: I generally believe selling premium is kind-of-meh at times. I mean, you're risking like 3:1 or sometimes 5:1 for a higher probability of profit. 5-10 wins can get wiped out in 1 loss sometimes. BUT, whatever works works. Making money in the end is all that matters. the positive expectancy is all that matters.

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Mar 31, 2018

I hear you P&D. Sometimes, feeling a little pain on some less-than-intelligent options strategies is the best way to learn. As for utilizing options on a specific index, or on VIX, is something I typically reserve for when I want to hedge for downside protection (buys SPX puts) if the setup looks promising and I believe we're either entering a period of increased volatility, or if I anticipate a prolonged down-draft in the markets.

I've also dabbled in mixed-margin accounts, but you really have to be on top of your game to make them work to your advantage. There are fees, you can easily over-leverage yourself, and the first time you get that house call (or margin call if the house call isn't more stringent) which requires you to either add $$s or liquidate a position(s) to meet the call, that can wipe out a lot of good previous trades.

I'd thought about getting a HELOC, re-opening my mixed margin account, and shorting some obviously overbought positions (think TSLA), but I'm getting to an age where I don't need to swing for the fences anymore. I'm still in growth mode, but not to the point where I wish to employ more complex strategies with risk I no longer need to accept.

For someone who has been trading options for only a year or so, it sounds like you've learned quite a bit. Good for you. verticals/horizontals and diagonals are some of the building blocks for solid options trading. Best wishes.

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Mar 31, 2018

Why does this website even allow binary options post? These are not real trading instruments on established exchanges but rip off sites.

Array
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Mar 31, 2018

I would agree trader, binaries are not really trading option, even though the call them binary options. Just a clever game of word-play to attempt to add some credence to a sham of an investment scheme.

Mar 31, 2018

I took a quick look at them when they popped up here. Aren't they basically the equivalent of gambling prop bets?

But they have nothing to do with finance

Array
Mar 31, 2018

From what I've seen, essentially, yes they are. Personally, I wouldn't touch them. I literally do not know of a single person who has done well on a prolonged basis by using these instruments.

In fact, the last wirehouse I worked for did allow for traditional options trading, but binaries were off-limits in any account type.

We tried to push CLIRNS (Capped-Levered-Indexed-Return Notes) whereby an investor would buy a fixed income note, say 1 - 3 years maturity, and the CLIRN was purchased with an options package included such that the managers would use various options strategies to increase the yield on these fixed income products. As the name implies, these instruments were capped to a max increase in acct value based on a specific index in which they were trying to outperform. Earnings were capped to a max amt, but considering these are actually FI products, the downside was limited as well.

Apr 12, 2018

I lost money to binary option scam

Apr 16, 2018

The NFA does not regulate binary trading (yet), and most binary options brokers worldwide are unregulated. The few who are regulated are generally based in Cyprus and are regulated by Cysec. These brokers may or may not be the best ones, so you will need some other criteria to help you make your choice and avoid binary trading scams
Check into how well capitalized a broker is before you sign up with a company. A well capitalized company is much less likely to lose your money than one which has plenty of money for operations. Even though binary options brokers aren't regulated like FX brokers right now, you can still find out whether a broker has $20 million in capital by checking with the Commodity Futures Trading Commission (CFTC).
If you have in any way lost your hard earned funds to any of these scam brokers, I have a good news for you. wealth recovery now is a leading firm that helps with binary option & ICO loss recovery. Just visit ; wealthrecoverynow dot co and contact support for a quick recovery.

Apr 16, 2018
Apr 16, 2018

my instinct tells me.... don't.

Apr 16, 2018

You can find out about binary options and providers at chiefbinaryoptions. com/en/option-web-review. Moreover, this broker provides demo account for practising, so you can try trading and understand the main features.

Apr 16, 2018

Binary Options have been around quite a long time now, typically become a great hit among the new traders. To get started, its important to explore the site like verifyproducts that covers all strategies and fundamental of binary options trading. Then you need to open free demo account on any platform and then practice the strategies to gain profit with real money.

Apr 16, 2018

search on Google or find out at chiefbinaryoptions. com

Apr 16, 2018

this is a very fast way to lose alot of money - if you want to trade try spot FX, binary options is basically coin flipping your payoff is all or nothing

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Apr 16, 2018

Selecting the right broker for your trading a trader can consider Some of these factors are:
Regulations
Company Capitalization
Trading Platforms
Broker Types
Customer Services

Apr 16, 2018

you don't trade binary options unless you want to lose money

Apr 16, 2018

You can find more information about binary options from this cool forex newswebsite called 7binaryoptions.

Apr 16, 2018

Choosing the right binary options broker is very important for successful trade. When it comes to make a choice, you should not select only them on the basis of offers they provide. Whilst you have to check out broker's reputation like no1options(dot)com, trading platform they use, information they provide, customer care services and most important their approach to make a deal.

Apr 16, 2018

Troll/baiting thread. Needs to be deleted.

Apr 16, 2018
TXEcon:

Troll/baiting thread. Needs to be deleted.

Yup 10000%

Apr 16, 2018

I can suggest you to check out binary brokers reviews (chiefbinaryoptions. com/en/best-binary-options-brokers), to decide which one is the best for you. To read about its regulation, assets index, services, popularity.

Apr 16, 2018

Do enough research and recommendations. I got scammed by a broker not long ago, I had to hire a refund professional to get my funds back.

Array
Apr 16, 2018

lol wtf
binaries are fun

May 20, 2018

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Jun 11, 2018

I lost Over $200k to Traders Vandetta. They made me trade and never allowed me to withdraw. I called them and they never picked up my calls, I sent several mails and they never responded. I reached out to my lawyers and they were unable to do anything from their end. Traders vendetta closed my account. So I reached out to Recovery at blackwebs dot org a Binary Options and cryptocurrency Recovery Expert , They guided me on steps to take to recover my money. I have been able to recover my money. I will never trade again

Jun 22, 2018

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Jun 29, 2018

It feels good when you recovered your lost funds from your scam broker. Some challenges of withdrawals we traders are facing today in binary option is not because binary option is no longer a nice place to invest capitals, but the problem is that there's a lot of scam brokers all
over the world. If you're facing some challenges of withdrawals or your broker manager is always asking you to make more deposit before you could place a withdrawals from your funds or you traded and lost your funds without any reason or maybe you noticed that your broker manager manipulated your funds and can't recover them like i did? There is a wealth management and recovery solution company who helped me recovery my funds. You can always reach me via email: Adriapalacio(at)yahoo(.)com and i would be happy to share this new discovery.

Jul 2, 2018

Thank you so much you have been very helpful with my search

Jul 31, 2018

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Aug 12, 2018

Trade12 always have a way to successfully convince you to invest with them but when you do, brokers also have an exit and a way for you to loose your fund by asking more funds and denying you your fund withdrawal. They put me into debt and my life was miserable until I was online looking for solutions and met with the name Steven brook and I made contact, he was able to recover my lost fund with interest and bonus. With Stevenbrook36 AT gOOGLEmail DOTcom. Your fund recovery is guaranteed,he is really a life saver.

Aug 13, 2018

Binary option is life destroying path If one isn't careful... I took my inheritance my dad left me and invested to a broker in Carlifornia only to find out I was scammed of over 65000$ I kept calling and mailing for weeks still no respond.. I had a miscarriage cause of this.. I couldn't speak to no one about it not even my husband..i was miserable and in Disarray for months..i lost affection for my husband it nearly broke us.. I was introduced to Mr Daniel master of funds recover by a friend of mine whom I had open up to..mr David was a blessing as he helped me recovery every penny of my money with interest.. Contact Mr David Davidstiles33 AT gmail DOTcom

Aug 13, 2018

Binary Options can either be your worthwhile or quite your downfall, it is
like
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Sep 6, 2018

It is not advisable to just embrace every trade opportunity because of scam,i have been a victim and lost upto 560,875$ trust me. It is always good to trade with broker using a transparent pricing, fast and reliable trade executions.. I have been scammed in forex and binary options before I got to know and actually recovered my funds back with the help of viapreferred AT gmail DOT com hacker group and still went ahead to trade with them
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Nov 13, 2018

it was everything gone wrong for me, i fell fully for their lies, had my broker handle my account for me which made things get worse but i was out there working almost all hours of the day to make sure i stay stable financially in life and all of a sudden +booom . i need cash and they are wasting my time to approve my withdrawal request. At this point i am beginning to get scared and after a while they stopped responding to my emails which became worse, i was going nuts until i was able to come across a company ( binaryoptionassetrecovery(+.com(. they were so helpful and we got back almost all of mu money back. im never going down that binaryoption or forex investment road again.

Nov 16, 2018

Everything about trading binary options is all fake because it's all based on lies, i have had my experience and it was a bad one the only thing that got me going is that i got those money back, one evening I received a call from this binary option company, with sweet words of how my investment can be doubled within a short time frame. I invested roughly $800,000, couple of weeks later, I went up to $900,000 - The next he asked me to sign a document online which I thought was a document to trade. He did not explain to me what that document was and as I was directed to the document, the robot took over and signed the document on my behalf. It turned out later that was the very important Bonus Statement with conditions that restrict withdrawals.
i was so devastated that i had to contact cysec but all i got was bunch of messages, chargeback is a handy procedure if you make your transactions with c/c, which wasn't my case. so alternatively i found this underground team cybercadet i contacted them on wickr username is cybercadet and also on cybercadet01gmailcom they specialize in using their skills to help people out by withdrawing stollen funds from the scambrokers, out of no time i started making reasonable chat with this guys then after some couples of days/weeks they finally got hold of all of my money and got it wired to me through an offshore account, guess you can call me lucky right and with all of my story and encounter on this journey of binary option trading i would say it's not a thing someone should willingly engage on and i hope some agencies that handles this type of frauds put a stop to this type of trade.

Nov 16, 2018

How could this be.. a post?
Maybe only overqualified (or overthinking analysts) could think about binary options.
Real traders don't even think about that piece of a joke.

Dec 31, 2018
Dec 31, 2018
Feb 11, 2019