Actually, I have no experience with binary options trading but on the internet, I see that people talk about them in a bad way.
Why does binary options trading has a bad reputation?
Thanks
$\begingroup$
$\endgroup$
Add a comment
|
3 Answers
$\begingroup$
$\endgroup$
2
Binary options are not traded on standard options exchanges and cleared OCC. Instead you are trading vs individual houses/web sites. These sites have been accused on not paying, freezing funds, and generally creating barriers to allow the customer to benefit from winning trades.
-
$\begingroup$ actually i think i have heard of some binaries on commodities that at least at one point were traded on exchange , also i think fed funds binary options used to trade on the CME $\endgroup$– RandorCommented Feb 4, 2021 at 9:58
-
$\begingroup$ I'm sure you could find legitimate ways to trade them. You could call a dealer and get an OTC market. But it just happens that the majority of the venues where retail investors trade are fraudulent. $\endgroup$– JoshKCommented Feb 4, 2021 at 13:37
$\begingroup$
$\endgroup$
Adding to the answer of @JoshK, many of the firms offering binary options often operate their scams by advertising their trading platforms on sites like Facebook. Their trading platform and website are designed to look very professional, making you think the company is legit. Some of the scammers go to the extent of creating YouTube accounts where they seemingly "daytrade" binary options with success on their own trading platform, and thus lure in new "uninformed" investors to their website/scam.
Be aware that the trading platform is rigged and in many cases they "let" you win a few trades, in order for you to deposit even more money into your account, and consequently trade larger positions. This will inevitably end with the investor loosing all of his money, if he keeps trading on their rigged trading platform. If you "win" a few rounds and decide to withdraw your money, they will do whatever possible to refuse the customers withdrawal request.
There are some informative sites here and here about the scams done with binary options.
$\begingroup$
$\endgroup$
I find the above answers very interesting, and they do manifestly support the premise of the question. This is not really an answer, but I do feel some right sizing may be appropriate, and I can offer some insight at least in terms of the UK.
My background is one of being an ex institutional exotics trader, am UK based, and unlike most UK traders, who are banned from trading binaries (I believe since ESMA ruled as such perhaps as of Jan 2020), am fortunate (or not, depending on perspective) to have professional status and therefore am permitted to trade them, should I wish to do so, under FCA regs.
The criticisms levelled above are both shocking, and completely alien to me. Digitals are not my instrument of choice for the most part for PA dealing, however have dabbled now and again, and have never encountered any of the issues mentioned above. Have traded them on a well established platform (which I've used for about a decade for other things) which offers them in addition to other instruments, and not from some unsolicited inbox / internet canvassing. Surprised that people do get duped by things like that!
In terms of why the regulator here does not like them, I think broadly:
A) they feel 'investors' do not understand the risks
B) particularly with short dated digitals, they feel the payoff is too prone to enabling / potentiating problematic gambling behaviour.
I've never been particularly enthralled by them, but I do like that they exist. Digital payoffs exist in sports betting, in the distant part I helped model correlated payoffs in this arena, and so that this post has non-zero math finance content, I will say here that Bachelier and not lognormal vols were de rigeur, but this is some years back.
If this post is hated, I'll be happy to delete, just trying to offer a perspective from some experience and having seen some regulatory opinion some time ago.
