By Myron Jobson For Thisismoney. All investment is risky but some propositions amp up the stakes to levels akin to slot machines in Las Vegas. Binary options are one of these. They allow you to bet that a stock, currency, index, or just about anything that is capable of being measured in financial terms, will move up or down in seconds.
In the time it takes to spin a coin, you can win back your money plus a percentage — or lose the whole lot. They have been labelled as 'the biggest investment con in Britain' by consumer group Which? Investors of binary options are often lured by flashy marketing campaigns often through social media from providers promising eye-watering rates of return. However, the sad reality is that people typically lose money on them, and the quick-fire nature of these trades leads to uninformed decision making.
Investors are offered higher returns for lower probability events and lower returns for higher probability events, so they need to 'beat the odds' on a regular basis to make a profit. This factor, along with the short duration of trades, can cause addictive behaviour typically associated with gambling, according to the City watchdog. The regulator also said those who invest in binary options are at greater risk of falling victim to scam artists than the more mainstream propositions.
They also commonly refuse to return client funds and break all contact with customers. In the publication of its research, Which?
Magnum Options, has since been shut down by the Insolvency Service. BinaryTilt failed to respond to This is Money's request for a comment on the matter.
A key risk of binary options is the fact they are typically priced in a similar manner to fixed odds bets, according to the FCA.
It said that many offered initial bonuses that required investors to trade up to 40 times their deposit before they were allowed withdraw cash. What's more, the consumer group claimed that some sites stated that customers would only be allowed to withdraw their profits - effectively banning them from getting their original investment back. From 3 January, binary options will be regulated in the same way as investment products and will be regulated by the FCA.
This means they will be regulated in the same way as vanilla equity and bond investment products, so any individual complaints will be resolved by the Financial Ombudsman Service and consumers will have access to the Financial Services Compensation Scheme. The industry consensus is that binary options should form no part of an investment strategy - be it long or short term. Some investors might find these products attractive because they essentially only have to guess whether or not something specific will happen.
But more often than not, it is a case of heads I win, tails you lose for the broker. The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.
By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline.
How to shield yourself against devastating losses if markets crash Crackdown on the celebrities who tout Bitcoin online: Former City minister warns on the seduction of 'a bubble that will inevitably burst' Bitcoin Bay!
London Stock Exchange chairman Donald Brydon comes under fresh attack Financial watchdog launches probe into Provident Financial's car finance firm Moneybarn Can you guess the UK's drink driving capital? We reveal the ten hotspots and the occupations most likely to be caught Do you really believe you can get rich betting on a rise or fall? Why binary options trading was branded Britain's 'biggest investment con' by Which?
Best credit cards to use this Christmas: Lamborghini reveals its ultimate 4x4: Auto-enrolment remains unfinished business - here is how we could make work pensions fit for everyone Could you be left out in the cold? Do you really believe you can get rich betting on a rise or fall? Binary options slammed by consumer group Which? Share this article Share. Share or comment on this article e-mail.
Most watched Money videos Exciting preview displays the Lamborghini Urus at high speed How to invest a pension pot in retirement Watch the evolution of the Range Rover model from to Award winning GW Next Base dash cam records in p resolution Buy banks, not beer: How to invest for higher inflation Big Money Questions show: What is a dividend?
You can't beat the market, so invest passively Life hack: Save money by installing foil behind your radiators Big Money Questions: Can you live well for cheap?
Five top bosses were ousted by LSE chairman, claims hedge London shares up but the pound is down as Record taxes paid by FTSE firms: Being too stocky for the squash court Nationwide apologises after online London Stock Exchange chairman Donald How U2 singer Bono offered to write a protest song to Crackdown on the celebrities who tout Bitcoin online Departing Tesco Bank boss Benny Higgins to become Government promises to free-up miles of motorway over Double dose of bad news for retailers as Black Friday GlaxoSmithKline among firms expected to Murdoch's 21st Century Fox restarts sell-off talks with Comments 1 Share what you think.
Post comment to your Facebook Timeline What's This? Your comment will be posted to MailOnline as usual. Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. Search All Articles Share prices.
The Buffettologist's guide to winning shares What if it happens again? How to profit from technology and hunt for the next consumer stars like Fever-Tree 'Be fearful when others are greedy and greedy when others are fearful', said Warren Buffett. Which should investors be right now? As house prices slow and tax hikes bite, is buy-to-let still worth doing? How to invest and achieve long-term returns that beat inflation and low savings rates 'Private investors have an advantage': Gervais Williams's tips to pick the best small company shares Britain is leaving the EU, but should Brexit-hit investors go the other way?
Are stockmarkets too expensive to invest right now? Should you invest in India? It's not fixed yet, warns Tom Becket Tips to choose the best funds for your Isa Can you profit from the growing Chinese middle-class? All hail the eco-taxi driven - it's one of the best people movers on the road Ray Massey test drives a taxi A black week for bank branches: So what is going on?
Will I lose my work pension after Brexit? I'm Italian and have been saving in the UK for 12 years Is the Government unfairly demonising diesel cars? The crypto currency revolution! Is it a passing craze or the next big thing for investors? Investor and MP John Redwood explains what it is and why it matters to you even if you don't invest Has the tide finally turned for Japanese stocks?
Experts pick the best funds to profit from Japan's resurgence I want to invest in a global ETF or tracker fund but how do I avoid having more than half of my money in the US?
Stock markets had soared, house prices were sky-high, interest rate rises were on the cards and political tension was rife Do the s sound familiar? The cheapest and most expensive DIY investing platforms to hold investment trusts revealed - BUT always look beyond the price tag Japan's stock market has hit a year high Has Abenomics recreated the economy or will political uncertainty and North Korea end the party?
Does Fidelity's move to performance-linked fund fees make it a shrewd pioneer or a big risk-taker? Would you like an expert's help with your investments and savings? Get ideas to improve your wealth in our Money Pit Stop.
Nothing tasty in the Budget? It Ain't Half Hot, Dad.. Should investors worry about a potential big correction, 30 years on from Black Monday? Kettle safety control maker Strix Group to benefit as global kettle sales start to boil. Full speed ahead as U. Income may be the Holy Grail Collapse in Provident Financial shares affects millions of investors in high-profile equity income funds.More...