Binary Options Fraud Prevention
There definitely is a lot of concern around the legitimacy of trading in binary options. There are many reasons for the continual backwards and forwards discussions about the validity of binary options trading. One of the primary reasons is because trading in binary options usually occurs via an online brokerage, it’s easy for scams and unregistered brokers to advertise on the internet and people run the risk of getting trapped by these murky fraudulent sites. Binary Options Fraud is a commonly occurring problem.
Before we go any further, let’s have a look at how fraud and binary options are both defined.
What is fraud?
Fraud is the willful hiding or misrepresentation of the facts for personal gain. Fraud is intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. In other words, if you decide to hide your annual income in order to reduce your annual income tax, you are committing fraud. You made the decision to hide the true value of your annual income in order to benefit from a reduced income tax bill. Fraud is a criminal offense and is often severely punished.
What is binary options trading?
Binary options trading is the simplest way to trade on the price fluctuations of underlying stocks. They are classified as exotic options as you do not buy and sell the underlying asset. You only trade on the price movement of a chosen asset within a particular timeframe. As its name states, there are only two options available when trading in binary options. You need to decide whether you think the price of the underlying asset will increase or decrease within a specified time. If you think it will increase, then you place a “call” contract; conversely, if you think it will decrease within the timeframe, then you place a “put” contract. If your predictions are correct, then you are “in the money”. On the other hand, if your predictions are incorrect, then you are “out of the money”.
Binary Options Fraud- How do you Protect Yourself?
There are several ways you can determine whether the binary options broker you are considering partnering with, is a legitimate company or is committing Binary Options Fraud. Here are some tips to help you determine the legal status of a particular broker:
- Is the brokerage registered and regulated with the financial authorities?
- Is it easy to find the broker’s registration details on their website? If you have to hunt for these details and eventually give up in frustration, then, in my opinion, you should be very wary of opening an account with this broker.
- Does the broker subscribe to the global Know Your Customer (KYC) policy? This is simply the requirement to collect an identification document and proof of residence from their clients, with the aim being to prevent fraud, money laundering, and the funding of terrorism.
Following these steps may sound like a lot of work just to open up a trading account with a particular brokerage, however, these are careful steps that are designed to protect you from being defrauded and losing your deposit, as well as to ensure that the company is not laundering money nor funding terrorist organizations.
Because there many binary options trading companies open for business today, it can take a lot of research before you have enough information gathered together to make an informed decision on whom it safe to partner with. After much searching I decided to partner with the Stern Options brokerage.
How Stern Fights Binary Options Fraud
Stern also asks for a list of KYC documents when you open an account with them. You cannot withdraw any of your investments until you have complied with this regulation and submitted all the documents they require. In case you are struggling to make sense of all their documents, their customer support centre is very helpful. Something that really impressed me about them is that when I asked about protection from Binary Options Fraud, they advised me that when making copies of my documentation I should be careful to cover important numbers on my ID and credit card. They helped me fill out, scan, and upload the required documentation in no time at all.