A binary option is a financial transaction in which participants can predict the specific outcome of an asset’s price over a specific period of time. Binary options, while simple to operate, are also known for their high risk, speculativeness and high risk of fraud. The following are the different types of binary options and their associated risks and safeguards.

Types of Binary Options

- Bet on whether the asset price will exceed or below the predetermined level at the time of expiration.

- Bet on whether the asset price will reach a specific price at least once before its expiration, regardless of the closing price.

- Beegoes whether the asset price will remain within a certain range during the term of the contract.

Key issues and risks

Due to its exploitative nature, binary options have been banned in the European Union (since 2018) and the UK (since 2019).

While binary options are legal in the U.S., they are heavily regulated by the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC), providing stronger protections for consumers.

2. Fraudulent Brokers

Many brokers operate in laxly regulated jurisdictions. Common unethical practices include falsifying data sources, leading to accidental losses.

3. Misleading marketing methods

They often tempt unsuspecting traders with “guaranteed” high profits and lavish lifestyles.

4. The nature of the zero-sum game

Binary options are more like gambling than an investment, with one party’s gain equal to the other’s losses.

Types of fraud

1. Binary Option Robot

Automated trading procedures that claim to provide account management services often involve account fraud, fraudulent transactions and false declarations of success.

2. Software fraud

Providers sell “artificial intelligence” software at high prices and claim high profits, but in reality, they only profit from the sale of the software itself.

3. Transaction fraud

The broker manipulates the data source, triggering sudden price fluctuations that cause traders to continue to lose money.

4. Signal fraud

- The provider sells the trading idea (signal) and promises to make a profit. These signals are often generalized or deliberately misleading.

Best Practices to Avoid Fraud

1. Choosing a regulated broker

Ensure that your broker is licensed by a recognized authority, such as the Commodity Futures Trading Commission (CFTC) or the U.S. Securities and Exchange Commission (SEC).

2.

- Use an independent, reputable comment platform. Avoid visiting websites that specialize in binary options trading as they may promote fraudulent brokers.

3. Test data integrity

Monitor the broker’s price information and check for abnormal or sudden price fluctuations when the contract expires.

4. Start with small.

- If you are involved in binary options trading, invest only with your disposable income, as there may be a loss.