It’s natural for people to be attracted to “hot” new investment trends. They often come with promises to make a lot of money relatively quickly, but it’s important to remember that investments offering big payouts come with big risks. Investing in a novel product can make sense if it suits your financial goals and risk profile, and you’ve checked the registration of the individual or company offering it to you. However, if the investment isn’t appropriate for your individual needs and circumstances, it could spell trouble for you in the form of significant losses.
Trading binary options is one trend in particular that is especially fraught with risk, so much so that it prompted the Canadian Securities Administrators (CSA) to issue an alert that urged investors to use extreme caution when considering an investment in binary options. The CSA is aware of multiple websites promoting binary options trading platforms that attempt to attract Canadian investors by making untrue and/or misleading statements about Canadian securities regulators’ oversight of binary options.
Despite listing Canadian contact information, many binary options trading platforms are based overseas in countries like Cyprus, Belize and the Seychelles. The companies managing these platforms are typically not registered to conduct business in Canada, which is required of any person offering investment services or products, whether online or in person. Investing with offshore companies operating outside of Canada can be risky and is a common red flag of investment fraud. Once money is moved offshore, it can be nearly impossible to recover if something goes wrong.
What are binary options?
Binary options are like an “all or nothing” wager on how an underlying asset will perform in a limited amount of time. Investors can have as little as 60 seconds to predict the market’s minute-by-minute fluctuations, which makes investing in binary options extremely risky, even for seasoned investors.
Binary options are highly volatile and can produce wins or losses quickly. Because they are often traded in currency markets, they can present a high level of risk for many investors.
What are the risks?
There are several websites that allow users to trade binary options. Some may claim that these investments are risk-free or that the site will reimburse its users for lost wagers. However, these claims are inherently too good to be true; all investing involves some amount of risk, and most site disclaimers will clearly state that investors could stand to lose their entire investment.
Websites that facilitate binary options trades can sometimes expose investors to potential frauds, including manipulating the trading software to adjust a binary option’s price and payout. For example, if a trade is “winning” during its allotted period of time, the option’s timeframe may be arbitrarily extended until the trade becomes a loss.
Certain online binary options trading platforms have refused to credit customer accounts or reimburse funds after accepting users’ money. Would-be customers who have deposited money into a binary options trading account are later encouraged by the platform’s “brokers” to add additional funds. When these customers later attempt to withdraw their original deposit or the return that they have been promised, the “brokers” may cancel the withdrawal requests, refuse to credit the account, or ignore customers’ phone calls and emails.
Many binary trading platforms are based overseas, even though they may list a Canadian phone number or address. This means that any Canadian investing with these platforms will will see their money moved out of Canada, and may not be able to recover it in the event that anything goes wrong. The companies operating these platforms may not be registered to conduct business in Ontario or any other Canadian jurisdiction; all investors are encouraged to check the registration of any individual or company before investing with them by visiting aretheyregistered.ca.