Playing safe with Binary Options….

Tuesday 6th December 2016

In this issue of Money Truths….

  • There’s nothing wrong with Binary Options….
  • The big problem is the volume of shark traders….
  • Multiple ways of separating you from your money….
  • Only in America….
  • Play it safe – observe the red flags….

There’s nothing wrong with Binary Options….

Last week I broke the ice on binary options – a type of ‘investment’ that has recently surged in popularity. If you missed that, catch-up here….

Binary option investments involve betting on whether financial assets – such as share prices, currencies or commodities – will rise or fall over a specific period.

At heart, binary options are a straightforward-enough proposition. There’s nothing wrong with binary options in and of themselves.

These one-way-or-another bets appeal to traders – professional and amateur – who have strong views on which way the price of a specific asset will go and who want to profit from their opinion in the marketplace.

The results are not rigged. The proposition is what it is. The outcomes are there for all to see. The price of the asset being traded either goes up or down over the set-period. If you call it right, you win a set amount. If you call it wrong, you lose your stake.

The individual trader who doesn’t really know what he is doing and is guessing at the price movements is probably gambling. The trader who thinks he knows a little something might think of a binary option investment as an exercise in informed speculation.

How the individual trader chooses to define his activity is very much the business of the individual. I can see it both ways.

But my point is this: binary options are totally legitimate. And, if you know a little something and you’re a good judge, you can make money.

For every losing side of a trade, there’s a winning side. And plenty of traders are proficient enough to be on the winning side more times than not.

And there are some honest and professional brokers offering traders a platform on which to trade binary options….

The big problem is the volume of shark brokers….

The problems associated with binary options revolve around the volume of shark brokers in the marketplace.

You need to be careful about who you get involved with. Choosing the right broker will very much determine what kind of experience you have….

Make no mistake, the world of binary option trading is murky. The waters are thick with unscrupulous operators, conmen and thieves – all attracted by the potential rich pickings they can pluck from ill-prepared and naïve investors.

Andy Fyfe, a financial crimes specialist at City of London police, recently referred to binary option trading as ‘the latest and fastest-growing iteration of investment fraud….’

Gabriele Giambrone, a lawyer based in London, says he possesses the case files of more than 3000 British individuals who have fallen victim to fraudulent binary option trading companies….

British police currently receive an average of two binary options-related fraud reports every day – some from individuals who have lost up to £200,000 to the sharks…..

Thousands of British investors have been targeted in recent months. Total losses to the scam artists amount to millions of pounds….

Multiple ways of separating you from your money….

Scammers use a variety of methods – some more sophisticated than others – to separate investors from their money. Sometimes it’s as agricultural as plain theft….

Lorry driver Stephen Taylor got involved in binary options after getting a cold call from a trader at a binary option trading company. He was persuaded to invest an initial £200 – and then another £800.

Then he got a cold call from another binary option company. He gave them his debit card details – stipulating that he only wanted to invest a small amount.

Next thing he knew, his bank was on the phone telling him that the second company had emptied his account to the tune of £2,400.

His bank eventually clawed that sum back. But when Taylor tried to withdraw the £1000 he’d deposited with the first company, he met resistance. He managed to get that sum back too – but only after months of emailing and kicking up a stink.

Mr. Taylor got out of his scrape with a few bruises but with his money intact. Many pensioners who are targeted with similar methods don’t have the nous or the physical robustness required to take the fight to the scammers. And the scammers get away with it – enough times to make the exercise more than worthwhile….

Other victims get taken another way…. Take Alex Gerrard, for instance….

He signed up with one of the binary options industry’s biggest operators – so big they were officially sponsoring a premiership football club until recently when the plug on that deal was pulled….

He started with a deposit of £300 but was very quickly approached with a series of inducements and bonuses which encouraged him to increase his overall investment to £26,000 – much of that sum funded by credit cards….

In February, he was contacted by his broker who instructed him to place a total of 90 specific bets. In less than two hours Mr. Gerrard’s entire account balance was wiped out. He was encouraged to invest more with promises that his losses could be easily recovered.

By that point Mr. Gerrard had recovered his senses. He refused and reported the firm to Action Guard – claiming breach of contract and misrepresentation.

Another customer of that same company lost a total of £76,000 in much the same way….

Earlier this year, that same binary options trading company, Banc De Binary, paid out $11 million to US authorities in settlement over allegation that it had illegally solicited business….

Only in America….

The binary options trading industry is heavily-regulated in the US….

Other nations are planning to follow suit. But, so far, the British government has failed to take any action at all – leaving British investors exposed to the machinations of the sharks.

Many scam firms operate out of Israel. Others operate out of Cyprus or Romania.

Being registered in a European Union nation enables these firms to take advantage of ‘passporting’ rules that enable them to target British investors and investors in other European nations….

There will be no letting up. That much is certain. People who have worked in the call centers operated by the scammers tell lurid tales of a ‘greed-is-good’ culture straight out of the Gordon Gekko handbook.

Salesmen are routinely referred to as ‘wolves’. Brokers are encouraged to ‘rape’ clients of their cash.

The Financial Conduct Authority says it wants to regulate the sector. But right now, the binary options trading companies are policed by the Gambling Commission – which has no control or authority over companies registered offshore.

The offshore scammers are pretty-much untouchable. Until the UK government stirs to the problem and acts, we can expect incidences of fraudulent activity to continue to grow….

It is important to remember that, to a large-extent, the scammers require the consent and compliance of unwitting investors to separate them from their money.

As I said earlier, binary options are a legitimate and useful investment vehicle for traders who want to monetize their opinions on which way specific asset prices are going to go.

There are plenty of honest brokers and platforms out there – alongside the bad. If you’re going to get involved, the key requirement is to recognize the difference….

Play it safe – observe the red flags….

If you’re thinking of playing, follow these simple and straightforward rules….

Close-down cold callers. Reputable brokers do not solicit new business by calling you out of the blue. That’s a red flag.

Disregard promises of outstanding performance and ignore offers of big bonuses.

Offer no personal information, politely hang-up and block the number to avoid repeat performances.

Do not respond to any form of ‘make big money quick’ marketing.

This might take the form of emails, online videos or the kind of social media accounts I mentioned last week.

Any marketing that plays down the risks associated with binary options trading and presents the investment as some kind of ‘nailed-on’ certainty is not to be trusted.

There are obvious and clear risks associated with binary options and marketing that fails to make that clear is misleading at best and fundamentally dishonest at worst.

Beware the sales funnel. This is a website or a social media account that directs you directly into the arms of a specific broker-many of which turn out to be sharks.

Frequently, the website owner or the social media account operator will claim to have made a lot of money with this broker. If he has made money with the broker, you can rest assured it is in the form of commission payments for introducing new business as opposed to investment returns.

Stick with licensed operators. Avoid brokers not licensed to operate within the UK. Check out individual companies on the Gambling Commission website.

Check the small print on prices. Your broker should offer actual market prices and not prices he himself has set. If the broker is the counter party to any trade, and sets the prices, it will prove difficult to make a profit with that broker.

Check the small print on bonuses. Many brokers offer deposit bonuses as an inducement for signing up. Fair enough. But check the small print. Unscrupulous operators have some unethical terms that require you to trade your initial deposit and bonus many times over before you are free to withdraw your money.

Finally, always be in complete control of your own trades. Don’t allow a broker, a bot or a pre-determined signal to dictate how and when your money is bet.

All bets you make should be your decision – and yours alone. If you don’t know what to bet on, why, when or how, then you probably shouldn’t be playing in the first place.

That’s how it looks from here….

I’ll be back with more on Tuesday morning.

All the best,


Dave Gibson

Money Truths