Binary options trading is a form of financial trading increasingly promoted over the internet. This form of trading promises high returns but is highly risky and can be a channel for financial scams.
What is binary trading?
Binary trading involves using financial instruments to attempt to profit from predicted movements in:
- Commodity prices
- Asset prices
- Index prices
These prices move up and down on a daily basis due to a complex range of factors. Binary trading involves putting money into a trading account and then placing positions based on predictions that the commodity, asset or index price will move up or down. Predicting movements in these prices is very difficult, if not impossible. If the prediction is correct the trader will make a profit. If the prediction is wrong they will make a loss. This is called speculation.
What should you look out for?
Some brokers trading in binary options are legitimate entities and are licensed to operate in Australia. It is important to note, however, that the vast majority of those entities operating from overseas are not licensed to offer their services in Australia. It is crucial that anyone wishing to use these services should first check that the company is appropriately registered in Australia.
How to protect yourself
- Be aware of investments that sound too good to be true.
- Be wary of investment offers
- made over the internet
- made over the phone
- made by entities residing overseas.
- Be wary of who you disclose your personal information to, as its misuse can lead to identity theft.
- Check out: ASIC professional registers to find out if a person or business has an Australian Financial Services Licence.
- ASIC has a list of companies that you should NOT to deal with.
- Be aware that binary options are high risk investments and a lower risk investment may be a more prudent choice. Seek a second opinion from a professional if needed.
We always recommend our customers take extra caution before providing personal and/or financial information, as many brokers who promote themselves on-line are not registered and may simply be outright scams. There are a number of reported instances of unregistered overseas options businesses taking their victim’s money and disappearing once identified. If the scammer is based abroad and is unlicensed it can be nearly impossible to recover lost funds. Customers should think twice before sending money to a company without checking its credentials with ASIC.