Binary Options
Trading Scams
Introduction to Binary Options Trading
A binary option is similar to a normal so-called ‘vanilla’ option, where you pay a premium for the option to buy or sell an instrument at a fixed price the exercise price. Profits or losses on this normal option can be small or large, depending on the difference between the exercise price and the price of the underlying asset. Unlike normal options, binary options do not fluctuate in value. The option is either in the money on expiry in which case it pays out, or it isn’t, where it expires worthless. Because of this nature of binary, many see an opportunity in victimising traders through binary options scams that are highly unlikely to end up in the money. These scam brokers get to collect the hefty premiums but never or seldomly payout.
Working the Binary Options Trading Scam
Spread-betting brokers typically make their money on the spread provided on trading, which is the gap between the buying price and the selling price and the commission paid by their clients. So, the business model of the broker does not benefit from losing traders. However, many brokers know that a losing trader can prove very profitable to them. Unprofitable traders are so profitable for many scam brokers that they will pay handsome introduction fees for every new trader. Therein lies the incentive. It doesn’t matter if you’re actually making any money from your trading. But if you can get even $20 as incentive for every trader who signs up with the minimum deposit of a few hundred dollars, then you only need to sign up 1,000 people a month to make $20,000.
How You Can Spot the Scam
If you know what you are looking for from the market, then it becomes much easier to spot the genuine companies out of the investment scams. If someone is promising to return $1,000 in five minutes for doing nothing, then be wary and probe further. Check out the credentials of the company. However, if you can’t find the broker listed on any of the popular review sites or there is a little or say no evidence that they are genuine, then the chances are that they aren’t. Beware of the brokers offering the ability of trading binary options using the signal providers or management services. This sector of the industry is high in risk.
Many binary options trading scams have been uncovered already. Just typing the name into a search bar is often enough to discover if that particular options broker has been hitting the latest news headlines and is operating under pretences.
Now, while there are various risks associated and fraudulent websites, which you should avoid at all costs, this shouldn’t deter you from trading the market. You just need to ensure that you choose your binary options broker wisely and that they are a licensed one with an excellent online reputation so you don’t pay the price for it later.
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