Trading in Binary Options is ‘the latest and fastest growing manifestation of investment fraud’, according to the City of London Police who say that £12 million has been reported lost by customers already this year. A Binary Option, also known as an ‘All or Nothing’ option is a financial option in which the payoff is either some fixed monetary amount or nothing at all. Binary trading companies, often registered in Cyprus and not subject to UK regulation, offer all-or-nothing wagers on whether a stock or currency will rise or fall over a certain period. The advertising is often flamboyant and misleading. For example “sign up and join 12 million traders who withdraw £4.6 million monthly”. Or “returns between 81% (high) and 5% (low)”. In fact many traders lose the lot.
It is frighteningly easy to trade. The websites offer user friendly steps, generally just 3 or 4, to open an account and start trading on the advice of ‘skilled and professional advisers.’ In fact, according to victims, the main skill seems to be in hard selling. On none of the ten sites which we visited was there any suggestion of a desire to ‘know your client’ or understand their attitude to risk or capacity for loss. Last February one of the main players, ‘Banc de Binary’, paid £8.5 million in a settlement with the US authorities over allegations that it had illegally solicited business. As ever with these things though, they would not prosper were it not for gullible customers. If it looks too good to be true, it almost certainly is. What was that about a fool and his money?
The above is the lead article in our monthly News Notes. Please click here for information regarding these notes.