Binary Options

Binary options are a type of financial product classified as an exotic option. Binary options trading may seem like a new speculative market, but they've existed since 1974. They were created by one of the largest derivatives markets globally, CBOE (Chicago Board Options Exchange). It wasn't until 2008 that binary options became primarily available to the public, and many entities copied the original CBOE asset type listing.

Binary options are a type of option that allows you to guess whether the option expires in the money – that's it. Some unregulated binary options brokers allow for guessing on out of the money outcomes. A simple yes or no bet is made, hence the name binary. Contemporary binary options have expiration times between a week to a few minutes, with the majority of modern binary options platforms specializing in under one-day expirations.

Binary options are overwhelmingly a scam and an illegitimate market. When you consider the various legal differences between the US, UK, and EU financial regulations, you may be surprised to find out that binary options markets are legal in the US but are now illegal in the EU and UK. In fact, the bans imposed on binary options markets in the EU and UK are very recent – 2018 for the former and 2019 for the latter.

A large reason for the banning of binary options in the EU was due to the dubious nature of CySEC (Cyprus Securities and Exchange Commission) broad granting of national regulatory approval to a large number of unethical binary options brokers.

The US's high regulatory environment makes participation in binary options marginally safer from a compliance standpoint, but it does not remove the inherent too high-risk nature of binary options. There is perhaps no market in the realm of financial markets that professional speculators and investors more deride than the binary options market. Know that binary options are more akin to gambling than speculation and that it is a true zero-sum instrument.

If you are a day trader or an aspiring day trader, familiar with some of the largest speculative and high-frequency trading markets in the world like forex or futures, you are probably familiar with the prevalence of robots (commonly known as ‘bots'). Binary options robots are often sold as a way to manage your account. This involves sharing your account information or an API to allow an individual or automated system to execute trades on your behalf. Binary option robot scams include many high-pressure sales tactics, false statements on the return on investment and success rates, along with graphics depicting a wealthy lifestyle as a result of using their system.

Software scams in the binary options space are common and fall right into the same realm as robots. Depending on the software used for binary options (most are often done via web browser), some software is touted as ‘advanced artificial intelligence (AI)' or ‘machine learning software,' leading you to believe that it is an extremely sophisticated algorithm that will generate substantial gains. Many software providers report high returns - the returns the software provider is making is from selling his/her software to others, not on the success of the software in the binary options market. As with robot scams, be wary of the sales tactics and false lifestyle imagery.

The number of trading scams in the binary options space is substantial. Because some of the largest regulatory agencies around the world have banned binary options, many former (and new) brokers have had to reestablish their businesses in nations where there is little to no real regulation. The broad bans of binary options have resulted in thousands of unregistered brokers all around the globe. Brokers within the binary options space have questionable to outright fraudulent data feeds. It's not uncommon to see bids and ask fluctuate violently within the final micro-seconds resulting in significant losses, sometimes on both sides of the trade! You can avoid some of the trading scams by using only regulated brokers, although very few are legitimate.