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Binary options were once popular as traders know the potential profit even before opening trading positions . Many platforms and brokers claim that through binary options, they promised a huge return and a high ROI . This false advertising has caused significant losses among investors while the big bosses behind the scams remain unpunished Pocket Option Scalping Strategy By Trading . Why binary options turn out to be a scam?

According to CFTC, a binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount. Once the option is acquired, there is no further decision for the holder to make regarding the exercise of the binary option because binary options exercise automatically.

Unlike other types of options, a binary option does not give the holder the right to buy or sell the specified asset Pocket Option Ki . When the binary option expires, the option holder receives either a pre-determined amount of cash or nothing at all . Unlike traditional instruments like forex, stocks, or futures, it does not require a trader to consider the range of a rise or fall.

For example, if a trader bets EUR/USD will rise in an hour with an investment of USD 100, then he or she will get 70% return (USD 70) if the price goes as expected or lose USD 85 if the price goes the opposite way.

With a simple trading logic similar to gambling, binary options are often taken advantage by scammers.

Binary Option Scams

Fraudsters tend to disguise themselves as a regulated broker that provides high-return trading instruments, i.e. binary options, through social medial ads, phone calls, and well-developed websites. The guarantee a high return and claim to they can avoid losses through techniques.

Binary options, by any means, are not an instrument suitable for newbies. No technical analysis can ensure 100% accuracy as the market price may be tested or confirmed several times. Traders can avoid risks by hedging or topping up positions, but this does not apply to binary options.

On the other hand, binary option brokers can easily manipulate the price movement. While fake forex brokers can earn more spreads through manipulation, fake binary option brokers can turn a win trade to a complee loss trade event at the slightest degree.

Bans on Binary Options

Binary options are widely banned across the globe as most regulators consider it risky.

ESMA announced to prohibit the sales, distribution, and marketing of binary options for 3 months in mid 2018. The temporary halt was renewed several times until July 1, 2019, when ESMA ceased the product intervention measure as "most national competent authorities (NCAs) have taken permanent national product intervention measures relating to binary options that are at least as stringent as ESMA's measure."

FCA decided to permanently prohibit selling, marketing or distributing binary options to retail consumers on April 2, 2019. The FCA's rules are in substance the same as the European Securities and Markets Authority's (ESMA) existing, EU-wide temporary restrictions on binary options. However, the FCA also applied its rules to so-called "securitised binary options" that were excluded from ESMA's prohibition.

CySEC banned binary options and related activities starting from July 10, 2019.

ASIC made a product intervention order banning the issue and distribution of binary options to retail clients on May 3, 2021 after ASIC found that binary options had resulted in and were likely to result in significant detriment to retail clients.

Binary options are legal and available to trade in the U.S. but they must be traded on a regulated U.S. exchange. These exchanges are Designated Contract Markets (DCMs). Some binary options are listed on registered exchanges or traded on DCMs that are subject to oversight by the CFTC or SEC. Here is a list of DCMs. This is only a small portion of the binary options market, though. There are currently only three DCMs offering binary options in the U.S.: Cantor Exchange, LP; Chicago Mercantile Exchange, Inc. (CME); and the North American Derivatives Exchange, Inc. (NADEX).

China Securities Regulatory Commission warned in 2016 that binary options platforms are a form of gambling and should be deal with by local public security organs.

Israel, Indonesia, Canada, and many other countries have established laws governing binary option trading.

A few countries that allow binary option trading include New Zealand and Malta.

As a result, binary option brokers can only trade in a limited number of countries and regions, and only a few forex brokers, such as CMC Markets, offers binary options through a specialized account.

Innocent Instrument, Guilty Scammers

In essence, binary options are innocent, as they are invented for speculation, not fraud. Scammers are to blame. They defraud victims and collapse the whole financial industry. There is still a long way to go to establish a transparent ecosystem in the financial industry.

Fintechs that assist in developing fake binary option trading platforms should also refrain from the dirty money. Building a fake platform will not generate a bumper profit, but will devour victims' money, or even all of their possession. [ Read more here ]