Warning about Binary Options
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  1. #1
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    Oct 2011
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    Default Warning about Binary Options

    Dear Community,

    I'm trading Spot Forex successfully for almost one year and decided recently to try trading Binary Options. I was very well aware of the risk, because Binary Options is more gambling than actual trading. But I had some extra cash, so I opened an account with OptionBit, one of the major Binary Options broker.

    For those not familiar with Binary Options (further: BO), I want to give you a quick introduction: BO have usually an expiry of a few minutes/hours, although there are weekly options, the minutes/hours are the more common used. You are betting if the price of an asset (currency pair, stock index, commodity) will fall or rise. If you call an option, you are betting that the price will rise. If you put an option, you are betting that the price will fall.

    Let's say you called an EUR/USD option with an 15 minutes expiry at 1.35000. If the price has risen above 1.35000, you will profit. Let's assume the payout rate is 75 % -> with an 100 $ bet you could gain 75 $ in only 15 minutes. But if the price has fallen, only 7 $ of your 100 $ bet would left.

    A 75 % gain in such a short time sounds very attractive, but don't think you can actually make money with Binary Options. The "brokers" are like casinos, only worse. In Spot FX some brokers can trade against you, but they also can direct your trade to an bank. With the BO Brokers there is a direct conflict of interests. Your profit is their lost, so they have absolutly no interest in your long-term success.

    I have also scalping experience, so I could occasionally "predict" the movements of a few assets (usually FX Pairs) correctly with the help of Technical Analysis. But remember, as my profit was a lost for the broker, soon the manipulation started. The options expired with a delay, so that an profitable trade became a losing one. Its funny how every delay made my previously profitable trade into a loser. I wrote to them and got no answer. I called, but was put on hold and didn't get any support at all. My profits were gone due to the manipulation trades.

    So I decided to withdraw the left money, which took horribly long. I already gave up, as I couldn't get any helpful answer from the "Customer Support" (a huge joke, I think the guys sitting their have no clue about options). In the end I got my money, it wasn't a huge amount, so I wasn't freaking out about the long time waiting. But imagine waiting weeks to get a larger amount of money back, which you need. I was lucky that I opened my account with a small amount of money.

    This is my experience with binary options. I haven't try the other BO brokers, but please people, be aware as the BO brokers are not regulated. If you are too profitable, they easily could take your profit. You can't sue them, nobody will help you.

    Anyway, I'm focusing on FX Spot only and if I will ever have the need to gamble a little bit - I will prefer my local casino.

    Best luck,
    John
    Last edited by JohnCA; 10-08-2011 at 06:01 PM.

  2. #2
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    Oct 2011
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    If someone has also experiences with Binary Options, I would like to read about them Feel free to post it.

    Happy Trading,
    John

  3. #3
    Join Date
    Mar 2007
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    Johannesburg, South Africa.
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    4,618
    Hi JohnCA,

    Thanks for posting. You've 'summed it up well'. Here's a link to a thread I myself started some time ago on the subject which has information that you may find of interest (and basically 'backs up' exactly what you're saying in your post):

    http://forums.babypips.com/newbie-island/38522-binary-options-beware.html


    Binary Options in and of themselves are in fact legitimate trading vehicles BUT NOT those that advertise 1 000 000% gains in a half-an-hour (usually with a 'pretty skirt with a smiling face' depicted in the ad). The CBOE (or the CME i.e. I forget which now but it's detailed on the thread noted) offers Binary Options and one can only assume that THOSE Binary Options are 'legit'. Basically they're nothing different than good 'ol 'plain' Vanilla Options really (but I'm no Options Expert so I may not be EXACTLY right). But yes: these 'in your face' Binary Option ad's that pop-up 'in your face' everywhere you look nowadays are indeed the latest scam to 'hit the trading business' (actually the word 'trading' doesn't even 'fit' really).

    What upsets ME the MOST (and I think it's detailed on that thread): it attracts those with absolutely NO knowledge of 'trading' 'like flies'. I tried to start a trading 'school' (for FREE) a year (or slightly more) ago. When I explained to my potential 'students' that if they could AVERAGE 10% ROI per month they were doing well ('in my book' anyway) they were 'gob smacked' (10% being 'too little' or 'not enough') and then one of them was told about these Binary Options. Needless to say some of them 'ploughed' THOUSANDS of USD into them and, well, I don't have to tell you what the end result of their endeavours were!!! LOL!!!

    Regards,

    Dale.
    Last edited by dpaterso; 10-13-2011 at 02:45 AM.

  4. #4
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    Oct 2011
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    New to all this and would like to check out this binary options stuff. Seems interesting. Any helpful links?

  5. #5
    Join Date
    Mar 2007
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    Johannesburg, South Africa.
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    Good morning,

    No offence is meant by this post New24ex but did you actually READ the thread starter's post and the link to my post on the subject???

    I thought I'd Google them for you (which I did) (and you can do the same if you so badly want to know about them). To my surprise though: I see that there are NOW a few (some KNOWN) spot FOREX brokers offering Binary Options)??? Now THERE'S a 'conundrum' for you (me).

    Remember one thing though: scam or not. If you cannot trade 'normally' or read a chart you're STILL not going to make money. 'Trading' Binary Options (well these ones that advertise $1 000 000 profit in 45-seconds anyway i.e. 'the pretty skirt' ones) is no different than trading on a fifteen minute or a one hour timeframe (and in some cases at some Binary Options Brokers the daily or weekly timeframes). The only difference really is that once you're in the 'trade' you're 'in' and cannot get out until the Binary Option expires 'in the money' or 'out of the money' (and even that's not strictly true anymore i.e. SOME of these 'bucketshop' Binary Options Brokers I see allow you to close the 'trade' early before a certain 'time limit' has been reached). The only Binary Option types that MAY be different from 'normal' trading are the ones that expire 'in the money' if price closes WITHIN a certain range or OUTSIDE of a certain range within the Binary Option 'time limit'. Other than that: it's no different from setting a stop and a TP and trading 'normally'. And of course: there's the HUGE 'promised profits'. Think for yourself: a good trader that knows how to 'call the market' 'short term' could quite easily bankrupt a 'bucketshop' Binary Options Broker with ease (if they didn't manipulate or spike price JUST before the Binary Option was above to expire 'in the money' OR delay the closing of the Binary Option before it 'expires in the money' which seems to be the 'trick').

    Binary Options (and I'm talking about REAL Binary Options as offered by the CME or CBOT are mainly used for 'insurance' on a real trade. They're not there (not theses ones anyway) as a profit making 'vehicle'.

    So the way I see it: this, and my post referred to above, are the only 'helpful links' you need!!! LOL!!!

    Regards,

    Dale.

  6. #6
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    Sep 2010
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    Quote Originally Posted by dpaterso View Post
    Good morning,

    No offence is meant by this post New24ex but did you actually READ the thread starter's post and the link to my post on the subject??? Regards,

    Dale.

    Lol!!! Hilarious, Dale.

  7. #7
    Join Date
    Mar 2007
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    Johannesburg, South Africa.
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    Isn't that what I said to you the other day??? 'Nobody listens' (in this case 'reads'). LOL!!!

    Anyway (and don't ask me WHY I've gone to this trouble) here are some 'helpful links' (at least these two brokers are regulated or 'subject to US regulatory oversight by the CFTC' but I'd check that and I'd also check some broker reviews before 'piling in'):

    PFGBEST | NADEX

    Binary Trading Options | Binary Trading | Nadex

    Have fun.

    Regards,

    Dale.

    Edit:

    Hmmnnn... After a little more 'digging' it turns out that NADEX is part of the IG Group which in its turn comprises IG Index and IG Markets (and NADEX as noted). I stress: check out broker review sites (as many as you can find e.g. www.forexpeacearmy.com is a good start)!!! And this applies 'across the board' i.e. no matter whether you want to trade Binary Options, spot FOREX, Futures, Commodities, etc. You get my point.

    Edit 2:

    I was just thinking: who knows. Maybe I'm wrong on this stuff. Us 'old timers' are always very quick to 'jump' on new 'fan-dangled offerings' without checking them out properly and don't accept 'change' too readily (at least I don't). Put it this way: with the brokers listed above I don't see any 'guaranteed returns' or 'skirts' so therein may lie the difference!!! LOL!!! If I myself WERE to look at these things (Binary Options) (and I'm not about to run out and 'give them a bash' on Monday morning) then those are the places I'd look (although again 'read between the lines' i.e. I've not read TOO many 'rave reviews' about the 'main' broker in question here). But you'll quickly find out whether the broker is 'on the level or not'. It'll only take two or three trades. The moment you see that the Binary Option was supposed to expire at a certain time and it is held open for a minute or two AFTER the noted expiry time OR if price just HAPPENS to 'spike' seconds before the expiry time resulting in your Binary Option expiring 'out of the money' well, then, you'll know soon enough if you're getting 'nailed' or not.

    Having said the above let me tell you something interesting that I've been noticing for the past few weeks (maybe a month or so) (and this must by NO means be taken as my sanctioning the 'Binary Options Skirt Brokers' and their bad 'behaviour'). As most will know I trade only trend following systems. With the markets being as volatile as they have been of late and with them trading in a range which is so obviously recognisable even I (ME) can see the range: I've found myself being 'forced' to trade on the shorter timeframes (4-hour and 1-hour) the logic being that even although on the daily charts the markets are trading in a wide range (but not wide enough for my trading systems to stop and reverse at a profit on the daily timeframes) there are 'mini trends' on the shorter timeframes that make up those alternate long up and down days and that's worked quite nicely for me (much to my surprise). What I HAVE noticed though: almost always 'like clockwork' price will begin to move in one direction or another just SECONDS before the top of the hour (alright: I'm talking about the major indices here of course i.e. I don't if this anomaly exists on spot FOREX). And here I'm talking about 'normal' trading not Binary Options or anything else like that. So it's not INCONCEIVABLE that even under normal circumstances, with a Binary Option, and depending on which 'flavour' of Binary Option you're trading, the price will move against you 'split seconds' before the Binary Option expires (assuming it expires 'on time'). Do you see what I'm saying??? It's gotten to the point with me (on the 1-hour timeframes) that if I have a signal from my trading systems to place an order I'll take the signal bar 'for what it is' a few seconds before the top of the hour. By waiting for the new price bar to open: very often priced has moved too far for me to be able to place the required stop order (so you're left with the choice of 'jumping in at market' and losing some points or just missing the trade). I've never noticed this before because normally I've only ever traded the daily timeframes. This is probably totally off-topic (or is it???) but I just thought it 'worth a mention'.
    Last edited by dpaterso; 10-15-2011 at 03:03 AM.

  8. #8
    Join Date
    Jan 2010
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    Quote Originally Posted by dpaterso View Post
    Good morning,

    No offence is meant by this post New24ex but did you actually READ the thread starter's post and the link to my post on the subject???
    I guess there is an ultra high correlation between those ignorants and the 95% suckers in fx. I would even bet on it, lol. Just saying. Don't be surprised they pop up everywhere, because them are so many, lol.

    Have a nice weekend Dale!

  9. #9
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    Oct 2010
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    Saint Paul, MN
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    Ok, so we can all agree that binary options are relatively new and under regulated and many platforms that are not regulated are akin to trying to beat a casino house. Is there anyone who has had success with a legitimate, regulated binary options broker?

  10. #10
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    Oct 2010
    Location
    Saint Paul, MN
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    P.S. Thank you Dale for doing all that research (I have done the same, and it is no easy task - so, tip of the hat) and posting your findings. I think currently, only NADEX is the only US regulated broker now (I may be wrong), but there is a very small handful of foreign brokers who are regulated by foreign securities commissions (EU, etc) who allow US traders. I'm curious about US traders who have successfully traded binary options through a legitimate non-white label foreign broker.

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