The Financial Conduct Authority has issued a warning about the risks of investing in binary options, after highlighting the potential for fraudulent companies to take advantage of inexperienced investors.
Currently binary options are not a financial instrument regulated by the FCA, however from 3rd January 2018 this will change. Up until then companies offering the trade of binary options have been monitored by the UK’s Gambling Commission – meaning their trade is more of a bet than a legitimate investment.
Trading in binary options involves making a bet on the change of value or price of a stock, commodity, currency, index over a very short space of time, often between 30 seconds and 5 minutes. According to the FCA data, the majority of consumers lost money when making bets and ‘consumers find it difficult to make sustained profits over a series of bets’. The FCA highlighted concerns earlier in November, including the risk of addictive behaviour, conflicts of interest and the potential difficulty on undue pressure from companies on the phone.
UK Investor Magazine published an article on this scam back in 2016, after receiving several complaints from readers who had been impacted by it. The full article can be found here.
