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The Binary Options Market
A binary option is a financial option in which the payoff is either some fixed monetary amount or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and fixed return options (FROs) (on the American Stock Exchange).[3]
While binary options theoretically play a role in asset pricing, they are prone to fraud and banned by regulators in many jurisdictions as a form of gambling.[4] Many binary option outlets have been exposed as fraudulent.[5] The U.S. FBI is investigating binary option scams throughout the world.[6][7] They estimate that the scammers steal US$10 billion annually worldwide.[8] The use of the names of famous and respectable people such as Richard Branson to encourage people to buy fake "investments" is frequent and increasing.[9] Articles published in the Times of Israelnewspaper explain the fraud in detail, using the experience of former insiders such as a job-seeker recruited by a fake binary options broker, who was told to "leave [his] conscience at the door".[10][11] Following the articles published by the Times of Israel, Israel's cabinet approved a ban on sale of binary options in June 2017.[12]
Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time?"[14] Trades place wagers as to whether that will or will not happen. If a customer believes the price of a commodity or currency will be above a certain price at a set time, he buys the binary option. If he believes it will be below that price, he sells the option. The price of a binary is always under $100.[14]
United Kingdom
Binary options trading
As of May 2017 binary options were not regulated by the Financial Conduct Authority (FCA), so investments in them are not protected by the financial services complaints and compensation scheme. The Isle of Man (a self-governing Crown dependency for which the United Kingdom is responsible) has issued licenses to companies offering binary options as "games of skill" licensed and regulated under fixed odds betting by the Isle of Man Gambling Supervision Commission (GSC).[47] This positions binary options as a form of gambling, and the administrator of the trading as something akin to a casino, as opposed to an exchange or brokerage house.
Binary option - Wikipedia
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