The Truth Behind Some Binary Options Scams
It is a fact that there are numerous allegations of binary options scams. There are just as many claims that binary options are the path to quick and easy money. Both can’t be true, unless of course they are a scam and the ones on the path to easy money are the scammers. I don’t think this is the case. There are a lot of reasons to assume that binary options are a scam but that does not make it so. It is also just as easy to see the possible profits available from a successful trade. Binary options offer traders the chance to earn 70-80% on standard trades, much higher than the average return on other types of options. Binary also provides the chance to lose vast sums, up to 100% of the original trade. It’s the high potential for losses that spark many of the claims of fraud. The thing that most of the accusers don’t mention is that if they had chosen a different type of trading vehicle, take retail forex for example, the potential for loss would have been much greater.
The Risks And Rewards Of Binary Options
Binary trading is often advertised as a simplified form of trading. In a sense it is. The pay out structure is much easier to understand than most other types of trading. If you choose a call and the option closes in the money you win, if it closes out of the money you lose. There is no concern over pips, drawn downs, stop-losses or intrinsic value. If the option is in the money you win, simple as that. The rewards of that simple trade are quite high, which accounts for why losses are often 100% of the original trade. It may seem unfair at first that potential profits and losses are not equal. If you win you may get a return of 80%. If you lose you lose 100%. What happens to that extra 20%? That’s how the brokers make money. They are a business. That 20% is the price of trading binary. In return you get access to the global markets, can trade options on any type of asset you choose, have low trade minimums, no margin requirements and a fixed return. That doesn’t sound like a scam to me.
What Are The Binary Options Scams
- Deposit Bonus Scam – Most brokers these days are offering some type of deposit bonus. The amount of bonus varies from broker to broker depending on factors like account size. Allegations of scams arise when traders don’t understand how a bonus works. Brokers will give you extra money into your account to trade but it is a loan, not a gift. You are not able to withdraw bonus money from your account until a trade volume minimum is met, usually in the range of 20-40 times the amount of the original deposit plus the bonus. This ensures the broker will not lose money by providing bonuses and that you, the trader can not simply get a bonus and then scram. One point that often causes contention is that the first money lost from an account is yours. For example, if you deposit $2,000 and get $1,000 bonus you balance is $3,000. You can only withdraw $2,000 until the trade minimum is met ($3,000 X 20). If you lose money and your balance goes below $3,000 then your available balance is the current total-the bonus. Another catch is that if you withdraw any amount of money before the trade minimum is met then you will forfeit the bonus AND any profits associated with it.
- Withdrawal Scams – Withdrawal is one of the most obvious places to find some sort of a scam. I always check into the withdrawal policies when reviewing a broker and am sometimes shocked at what I find. Sometimes a broker will offer great returns, big bonuses and low minimums only to turn around and make it so hard or costly to withdraw money that it doesn’t make a difference how much you win. One broker only allows withdrawals requests 30 days after the last deposit and then takes 5-10 business days to process once completed. That means up to 50 days before a withdrawal clears to your account and that doesn’t take into account possible fees. Other times there are limits to withdrawals that prevent you from taking out more than X amount each month.
- Expiry Rates – When binary options first came out I heard a lot about brokers fudging the expiry rates so that options would close out of the money. This does not happen so much anymore, at least not with any top broker I know of. The thing to watch out for, or at least to be aware of, is that the rate at which you buy the option may not be the same as the current listed price you see on TV. This is equivalent to the bid/ask spread you would find in most other types of trading. The given rate is the rate at which the broker is willing to accept your trade. This may sound like a scam but it is not, provided you understand what you are trading. It is one of the ways the brokers are able to offer such high returns and short term options like 60 seconds. The risk to both parties in such a trade is very high. The spreads are usually small and have little impact on positions with more than a minute or two until expiration.
Choosing The Right Binary Options Broker
Choosing the right binary options broker can be tough. There are a lot to choose from and all have something to offer. The best way to know if a broker is right for you is to do the homework and check into yourself. You need to read the terms and conditions. You need to review the platform and you need to read the reviews. If you think you have found the right one you can open a demo account to give it a try. A good place to start is with our trusted brokers. LBinary and AnyOption are two of the top brokers. Remember, don’t just take our word for it, find out for yourself.
- AnyOption – AnyOption is one of the oldest and most reliable binary options brokers. They Reuters feed system to provide up to the minute expiry times. Bonuses are available and come with the lowest trading volume minimum in the industry, 15 times deposit+bonus. The bonus comes with the additional stipulation that the 15X minimum be met within 3 months. Other features include a Roll Forward options that lets trader add expiry time to positions and a Take Profit option that lets you close trades early. Deposits and withdrawals can be made by credit card or wire transfer.
- LBinary – Is one of the newer brokers but one that promises to be a leader. LBinary has the fastest withdrawal of any broker I have reviewed. Once account identification requirements are met all withdrawals are processed and delivered in 3 business days. Wire transfers have a $500 minimum withdrawal but there are no minimums for other types. There is a $30 fee per wire transfer after the first transfer each month. Bonuses are also available and come with a low 25X trade volume minimum.
Conclusion; Binary Options Are Not A Scam
It is clear that binary options are not a scam if you read the details. Yes there is risk involved but there is risk with every type of trading vehicle. The cost of trading binary options, ie losing 100% per trade, is actually pretty reasonable when think about you get in return. Global markets, forex, commodities, no margin, high returns and account bonuses. You just have to understand what your trading and know who you are trading with.