Binary options good for a newbie? - page 2

 
dianajs:

I'm not sure what's the connection?

Gambling and money laundering of epic scales?

 

CFTC Fraud Advisories

  • The Commodity Futures Trading Commission’s (CFTC) Office of Consumer Outreach and the Securities & Exchange Commission’s Office of Investor Education and Advocacy are issuing this Investor Alert to warn about fraudulent schemes involving binary options and their trading platforms. These schemes allegedly include refusing to credit customer accounts, denying fund reimbursement, identity theft, and manipulation of software to generate losing trades.
  • Binary Options

    Binary options differ from more conventional options in significant ways. A binary option is a type of options contract in which the payout will depend entirely on the outcome of a yes/no proposition. The yes/no proposition typically relates to whether the price of a particular asset that underlies the binary option will rise above or fall below a specified amount. For example, the yes/no proposition connected to the binary option might be something as straightforward as whether the stock price of XYZ company will be above $9.36 per share at 2:30 pm on a particular day, or whether the price of silver will be above $33.40 per ounce at 11:17 am on a particular day. Once the option holder acquires a binary option, there is no further decision for the holder to make as to whether or not to exercise the binary option because binary options exercise automatically. Unlike other types of options, a binary option does not give the holder the right to purchase or sell the underlying asset. When the binary option expires, the option holder will receive either a pre-determined amount of cash or nothing at all. Given the all-or-nothing payout structure, binary options are sometimes referred to as “all-or-nothing options” or “fixed-return options.”
    Binary Options Trading Platforms
    Some binary options are listed on registered exchanges or traded on a designated contract market that are subject to oversight by United States regulators such as the CFTC or SEC, respectively, but this is only a portion of the binary options market. Much of the binary options market operates through Internet- based trading platforms that are not necessarily complying with applicable U.S. regulatory requirements. The number of Internet-based trading platforms that offer the opportunity to purchase and trade binary options has surged in recent years. The increase in the number of these platforms has resulted in an increase in the number of complaints about fraudulent promotion schemes involving binary options trading platforms. Typically, a binary options Internet-based trading platform will ask a customer to deposit a sum of money to buy a binary option call or put contract. For example, a customer may be asked to pay $50 for a binary option contract that promises a 50% return if the stock price of XYZ Company is above $5 per share when the option expires.

  • If the outcome of the yes/no proposition (in this case, that the share price of XYZ Company will be above $5 per share at the specified time) is satisfied and the customer is entitled to receive the promised return, the binary option is said to expire “in the money.” If, however, the outcome of the yes/no proposition is not satisfied, the binary option is said to expire “out of the money,” and the customer may lose the entire deposited sum.
There are variations of binary option contracts in which a binary option that expires out of the money may entitle the customer to receive a refund of some small portion of the deposit—for example, 5%—but that is not typically the case.

In fact, some binary options Internet-based trading platforms may overstate the average return on investment by advertising a higher average return on investment than a customer should expect given the payout structure. For instance, in the example above, assuming a 50/50 chance of winning, the payout structure has been designed in such a way that the expected return on investment is actually negative, resulting in a net lossto the customer. This is because the consequence if the option expires out of the money (approximately a 100% loss) significantly outweighs the payout if the option expires in the money (approximately a 50% gain). In other words, in the example above, an investor could expect, on average, to lose money.

http://www.cftc.gov/consumerprotecti..._binaryoptions
 

When it came to CFTC then it is more than just hear-and-say. Sad to see how it is misused

 
on my own:
When it came to CFTC then it is more than just hear-and-say. Sad to see how it is misused

It was always like that. Only forex brokers are a bit more regulated

 

Without regulation it will be even worse though, there are enough scammers on the market as it is. If there's no regulation it will be even worse.

 
mlawson71:
Without regulation it will be even worse though, there are enough scammers on the market as it is. If there's no regulation it will be even worse.

The only question is : how much worse it will be? And shall we be able to trade at all

 
morro:
The only question is : how much worse it will be? And shall we be able to trade at all

I think only someone dealing with statistics can give a proper answer to that question, since they'd be able to quantify it. But to put it in layman's terms - I think it would be so bad that there'd be no point in trading.

 
mlawson71:
I think only someone dealing with statistics can give a proper answer to that question, since they'd be able to quantify it. But to put it in layman's terms - I think it would be so bad that there'd be no point in trading.

Yep, and we are getting closer to that day with each and every day that passes

 
morro:
Yep, and we are getting closer to that day with each and every day that passes

Why? I mean, there are always alerts about scammers, but I don't think there are more than before? Or are there?

 
mlawson71:
Why? I mean, there are always alerts about scammers, but I don't think there are more than before? Or are there?

The market is so rigged (and so controlled) that small traders are used only as a bait - for suckers