Investor Protection Alert: Binary Options

A Binary Option is a type of options contract (investment) that is nothing more than an “all or nothing” wager on whether the value of an underlying asset (such as a particular currency or a specific commodity) will go up or down within a certain period of time. There are only two possible outcomes: 1) the investor wins up to a modest amount of money; or 2) the investor loses 100% of their investment. 

Binary Options are highly volatile and can produce a profit or loss very quickly. Investors can have as little as 60 seconds to predict the market’s minute-by-minute fluctuations, which make investing in Binary Options extremely risky. Binary Options are completely different than listed options, which, while carrying their own risks, are offered by established companies based in the U.S. that are regulated by the Chicago Board Options Exchange (CBOE) and other regulatory authorities. Binary Options can be legal and available to trade in the U.S.; however, they must be registered or subject to an exemption, such as being traded on a regulated U.S. exchange. 

Most Binary Options trading platforms are based outside the U.S., purportedly in countries like Cyprus, England, Israel, and the Seychelles. Many times after an investor makes contact with the Binary Options company through the internet, the companies will contact the investor by telephone, often from a disguised number. These phone calls may involve company representatives using high pressure sales tactics to get more money from the investor. The majority of these companies are not registered with the appropriate regulatory agency, and it is best to avoid them entirely.

The Securities Division has been proactively investigating Binary Options websites for more than a year. Since that time, the Division has investigated some of the most popular Binary Options companies which offered trading on their websites.

In the Securities Division’s investigations, it is often discovered that a Binary Options company is not registered to conduct securities business in Missouri, but their website still allows Missouri residents to open an account. When the Securities Division discovers these websites it works to have them changed to no longer allow Missouri residents to open an account. Thus far, the Securities Division has taken action against six Binary Options companies, including a recently issued Final Order against