Managing a profitable business endeavor is what some might call an art. Changing markets, regulations and risks accompanying finance activities are no news anymore. The same can be said for “alternative” finance industries, such as binary options.

Being different from established industries, the binary market is far from simple. Frauds, losses, and inconsistency of the market trends all took a tool, resulting in decreased trust. Thus, in this article, we go over the current situation regarding binary options and what future will hold of the investors who opt for such investments.

What are Binary Options?

Judging from companies offering the service, one would think binary options are one of the best ways to become a millionaire. On the other hand, those that have lost funds using them would label binaries as “a sure way to burn one’s money”.

The reality is somewhere in between, as with all things. Binary options are simple contracts upon which you predict the price of a certain asset/commodity. If the prediction is correct, profit is made. If wrong, all funds are lost that were stacked up in the agreement.

The Yes/No option can be seen as a reason why binary options became so popular. They are very easy to understand and use. On the other hand, careful analysis is a must-do, much like with other investment-related activities. These contracts, although more like betting, do use common sense and regular financial analysis of the chosen commodity for the binary contract. Without a sound knowledge of the market and the stock price fluctuations, one cannot really predict the price.

What makes binary options different from stock trading is the fact that the market is largely unregulated. There are no clear standards set in place, though governments do exert efforts to rein the industry in as we speak. Additionally, the two-way outcome can be manipulated easily, since binaries are offered by companies and are not part of the peer-to-peer exchanges like stocks are.

The Rise of the Ghost Market

Uncontrolled and unsupervised, the binary options rose to public’s focus in recent years through their start is recorded in 2007. It is no coincidence that binary options appeared roughly when the financial crisis hit the markets, as investors were looking for channels to recover lost funds. Trading with these options remains the same since their foundation, which is similar to Forex and call/put trading activities.

There are no official data regarding the market size though it is evident that industry grew tremendously since 2007. According to the Times of Israel, approximately $10 billion was lost due to the frauds annually. Thus, we can safely assume that the market is large though no one can say exactly how big it really is.

Fraud and Regulations

As mentioned before, almost $10 billion on annual basis are reported to be lost due to the scams in binary options. The industry, as the regulation was lax, allowed multiple businesses to take the reins and draw unsuspecting investors in with “too-good-to-be-true” promises. Many governments are now trying to create policies that would either control fundraisers or even ban the market entirely, as is the case with Israel.

Although legal in the US, the FBI, and other government officials warned investors off the market, due to a large number of fraudulent activity. Typical scams that can be found nowadays revolve around tactics like price manipulation, rejection of withdrawals, lack of trial periods, scam signals, and identity theft. These are possible due to the fact that individual business offer options as part of their trading service portfolio.

Investors are advised to keep a tab on lists of confirmed websites that have scammed their users. Still, many new ones open regularly and control of the market are beyond the reach at the moment. Taking risks is a natural part of trading and investment. Thus, binary options, with their promises of high returns, are proving to be hard to control.

EU, Belgium, Canada, Israel and New Zealand have all either banned or limited the players in the binary options markets. Without licenses issued by respective Financial Institutions, most businesses have either shut their operations down or have simply moved outside of the country toward the region that is more binary-friend.

Outlook on the Future

Apart from scams, there are many legitimate businesses that offer binary options for their clients. Returns might not be as high as with companies that have high-risk rate but the system functions without any issues. Thus, no matter what many experts might report, binary options are not going anywhere, much less dying out.

We do expect governmental bodies to take a more proactive approach in coming months, due to ever-growing scam lists. EU, for example, forbade fundraisers within their borders while businesses offering these options need to register their services within The European Securities and Markets Authority (ESMA).

It is difficult to estimate whether tighter control will eliminate risks entirely when frauds are in question. Nevertheless, we would advise our readers to always act with caution and keep an eye on the firm’s reputation when trading binary options.

Recovering Lost Funds

Depending on the situation, it is possible to return lost funds if appropriate measures are taken immediately. All steps should be recorded, as well as a contact list of the businesses investors work with when purchasing binary options. Finance Recovery provides investigation, as well as recover lost funds services. With time being essential, they would gather the data and contact authorities with proofs, in order to locate the perpetrator.

Nevertheless, there are many situations in which it would be difficult to collect money back. Thus, extreme caution is advised. It goes without saying that preparation is everything and bypassing shady businesses is the best recovery tool that an investor can implement, apart from hiring professionals.