Canadian regulators are raising the alarm with an awareness campaign about investor fraud involving so-called “binary option” scams.
Options are a popular but sophisticated product that can be used by experienced investors as part of an investment strategy, often providing offsetting positions that allow an investor to hedge positions. In the case of binary options, however, no individuals or firms are registered to sell such a product in Canada, regulators.
The Canadian Securities Administrators have set up a website resource that warns of the risk to victims to fall for social media and other pitches, often from overseas sites that are not subject to Canadian regulation.
The CSA explains binary options like this:
“It’s an all-or-nothing proposition in which you bet on the performance of an underlying asset – a currency or a stock, for example. The deal promises quick money: you are supposed to receive a predetermined payout, sometimes within minutes or even seconds. Or you lose your money altogether. But in many instances, no actual trading takes place – the pitch is just a con to steal your money.”
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