Binary options: spot the red flags

No company is authorized to sell binary options in Canada. Learn more about how to protect yourself.

What are binary options?

Binary optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition are like an “all or nothing” wager on how an underlying assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment, property, a car, investments, or cash. Can also include patents, trademarks and other forms of intellectual property.+ read full definition 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.

A growing number of websites and companies are making claims about how quick and easy it can be to make money by trading binary options. No matter what they say, the truth is that none of these companies can legally sell binary options to Canadians. Businesses that are illegally offering Canadians binary options are operating all over the world. Investing with an offshore company is a high-risk activity that makes it nearly impossible to recover lost money if something goes wrong. If you investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in binary options, you could lose some or all of your savings.

It’s natural for people to be attracted to “hot” new investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition 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 registrationRegistration A requirement for any person or company trading investments or providing advice in Canada. Securities industry professionals are required to register with the securities regulator in each province or territory where they do business.+ read full definition 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.

Warning issued by the Canadian Securities Administrators

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)Canadian Securities Administrators (CSA) The Canadian Securities Administrators (CSA) is an umbrella organization of Canada’s provincial and territorial securities regulators whose objective is to improve, coordinate and harmonize regulation of the Canadian capital markets+ read full definition 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.

Talk to the OSCOSC See Ontario Securities Commission.+ read full definition

If you’ve been approached by a binary options trading company or have lost money in a transactionTransaction The process where one person or party buys goods or services from another for money. Examples include taking money out of an account, buying something with a credit card or taking out a loan.+ read full definition, we want to hear from you. To learn more about how to better protect your money, get in touch with the Ontario Securities CommissionOntario Securities Commission An independent Crown corporation that is responsible for regulating the capital markets in Ontario. Its mandate is to provide protection to investors from unfair, improper or fraudulent practices and to foster confidence in fair and efficient capital markets.+ read full definition Inquiries and Contact Centre.

What are the risks?

There are several websites that allow users to tradeTrade The process where one person or party buys an investment from another.+ read full definition 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 accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition 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.

Check before you invest

Individuals and businesses need to register with their local securities regulatorSecurities regulator A government agency that enforces the securities act in jurisdiction it has authority over. This act is made up of laws that establish rules for issuing and trading securities. The Ontario Securities Commission is the securities regulator for Ontario.+ read full definition in order to offer investment products, services or advice to Canadians.

Before you invest, check to make sure that the person or business you’re dealing with is registered. The Canadian Securities Administrators’ National Registration Search is a quick way to check the registration of a dealer or advisor.

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