Beware the scam merchants in binary-options trading

Despite the regulator’s best efforts, social media is still infested with financial con artists hunting for potential victims. Trader Michael Taylor explains how to spot and avoid them

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On 29 March last year the UK’s financial watchdog, the Financial Conduct Authority (FCA), banned the sale, marketing and distribution of binary options to all retail customers. It’s a step in the right direction. But unfortunately the binary-options bubble continues to brew. Unless more decisive action is taken, more and more people are going to be cleaned out of their savings by unscrupulous operators.

A binary option is similar to a normal (“vanilla”) option, where you pay a premium for the option to buy or sell an instrument at a fixed price (the exercise price – see box below for a detailed explanation). Profits or losses on vanilla options can be small or large, depending on the difference between the “exercise” price and the price of the underlying asset.

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Michael Taylor is an ex-trader. For more from him, see shiftingshares.com.