A binary option is a bet on whether a price will be higher or lower than it is now in a few minutes: if you are right, you get a fixed 70-90% of your stake; if you are wrong, you lose all of it. Because of this asymmetry every trade loses money on average before any fraud even starts: with an 80% payout and half of your trades correct, you lose 10% of every stake on average. That is why the EU, the UK, Australia, Canada and Israel have banned the sale of binary options to retail clients, and why trading signals for them are mostly sold by people who earn on their clients' losses.
Oleksandr Suhak
17 min read
A binary option is a contract with two possible outcomes. You choose an asset (a currency pair, gold, a share, a cryptocurrency), a direction ("higher" or "lower") and the time until the trade expires, which on most platforms is anything from 30 seconds to a few minutes. If at expiry the price is on the right side, the platform pays a sum known in advance. If not, you lose everything you staked.
That is why the US regulators CFTC and SEC call these contracts "all-or-nothing" or "fixed-return" options. The word "option" is misleading here. An ordinary exchange-traded option gives you the right to buy or sell an asset at a set price, and it can be used to insure a portfolio. A binary option gives you no right to anything except the payout: you do not buy the asset and you do not take part in exchange trading. The trade is made with the platform itself.
| Exchange-traded option | Binary option on an online platform | |
|---|---|---|
| What you get | The right to buy or sell an asset at a set price | Only a fixed payout if you called the direction right |
| Term | Weeks, months, years | From 30 seconds to a few minutes, less often days |
| Other side of the trade | Another market participant, settled through the exchange | The platform itself |
| Size of the gain | Depends on how far the price moved | Fixed, usually 70-90% of the stake |
| Size of the loss | Depends on the strategy, for a buyer limited to the premium | 100% of the stake for any move the wrong way |
| What it is used for | Portfolio insurance, investment strategies | Only a bet on a short price move |
The main trap of binary options is hidden in the terms of every trade. A typical example given by the European regulator ESMA: you stake EUR 100, and if you win the platform returns EUR 180. So a win brings +EUR 80 and a loss takes -EUR 100. If the price is equally likely to go up or down, the average result of a trade is 0.5 × 80 - 0.5 × 100 = -EUR 10, or -10% of every stake.
Over short periods the price of a currency pair or a share moves almost randomly, so consistently calling more than 55-56% of trades right is unrealistic even for a professional. On platforms with a lower payout the threshold is higher still.
| Payout on a win | Win rate needed to break even | Result per trade at a 50% win rate | Result per trade at a 55% win rate |
|---|---|---|---|
| 60% | 62.5% | -20% | -12% |
| 70% | 58.8% | -15% | -6.5% |
| 80% | 55.6% | -10% | -1% |
| 85% | 54.1% | -7.5% | +1.75% |
| 90% | 52.6% | -5% | +4.5% |
A single trade is a coin toss: 50/50. But the more trades you make, the more the negative expectation shows. ESMA modelled this with an example: after two trades the overall result is a loss in 75% of cases, after twenty trades only about 25% of people are still in profit, and with further trading the probability of a loss approaches 100%. We calculated the same odds for a larger number of trades.
The short term of the trades makes this maths especially harsh. If an option lasts a minute, you can make a hundred trades in an evening. According to ESMA, at two platforms that provided statistics the average client made 27 to 54 trades a month, and another platform reported 100-200 trades per client. The regulator directly linked such trade counts to the risk of compulsive, gambling-like behaviour.
Even a strong result does not save you. If you call 55% of trades right with an 80% payout, the average result is still -1% per trade, and after 500 trades only about 41% of such "traders" remain in profit. For the maths to work in your favour, you would need to call more than 56% of trades right for years in a market where the price behaves almost randomly over one-minute intervals.
On an ordinary exchange your profit is someone else's loss in the market, and the broker earns a commission whatever the result. Binary options work differently. ESMA explains that the platform is usually the client's counterparty, so your loss becomes its income, and its business model needs clients to lose on average. That is why ESMA listed a "structural expected negative return" and an embedded conflict of interest between the platform and the client among the reasons for the ban.
This conflict of interest does not stay on paper. The CFTC and SEC received three types of complaints about binary options platforms:
Bonuses are a separate trap. Platforms often offer "+100% on your deposit", but the terms say you can only withdraw after a trading turnover dozens of times larger than the bonus. Here is how that looks in a hypothetical example.
Most people come to binary options through signals: Telegram channels, "VIP groups", "robots" and "indicators with 90% accuracy", free marathons and paid "trading courses". The promise is simple: you are told when and in which direction to open a trade, and you just copy it. The FCA warned that online trading schemes are promoted on social media with fake celebrity endorsements and photos of expensive watches and cars, and that younger people are more likely to trust investment offers from social media.
A signals channel almost always leads to a specific platform through a referral link. Binary options platforms run affiliate programmes with two typical payment models: a fixed amount for each client who funds an account, or a share of the platform's revenue from the referred clients. Since the platform's revenue is the clients' losses, in the second model the signals author literally gets a percentage of your losses. Their income grows when you lose and top up again.
The second source of income is selling subscriptions, "VIP access" and "training". The third is handing the "most active" clients over to "personal managers" who call and persuade them to deposit more, which is exactly how the CFTC and SEC describe typical complaints.
Suppose the signals really are right on 85% of trades, as the ads claim, and the payout is 80%. Then the average result of each trade is 0.85 × 0.8 - 0.15 = +0.53, that is +53% of the stake. A person risking only 2% of the account per trade and making 10 trades a day would grow the account about 8 times over 20 trading days. Over a year, a few hundred dollars would turn into millions. The owner of such a system would simply trade it themselves, and selling it to strangers on Telegram for USD 30-50 a month would make no sense at all.
Technical indicators, "Fibonacci levels" or "pin bars" do not change the maths from the previous section. Even if a tool is slightly better than a coin toss, a 70-90% payout against a 100% risk eats up the edge, and the platform controls both the price and the moment the trade expires.
Regulators in several large financial markets reached the same conclusion: binary options have no useful investment function for retail clients, and the losses they cause are systematic. The FCA's executive director of strategy and competition called them gambling products dressed up as financial instruments.
| Country or region | Regulator | What applies |
|---|---|---|
| Israel | Israel Securities Authority, the Knesset | Sales to Israelis banned since 2016; a law of October 2017 banned Israeli companies from selling binary options to clients abroad too |
| Canada | CSA | Since 12 December 2017 it is prohibited to advertise, offer or sell binary options with a term under 30 days to individuals |
| European Union | ESMA | Since 2 July 2018 marketing, distribution and sale to retail clients are prohibited; the ban was renewed several times |
| United Kingdom | FCA | Permanent ban for retail clients since 2 April 2019 |
| Australia | ASIC | Ban for retail clients since 3 May 2021, extended to 1 October 2031 |
| USA | CFTC, SEC | Legal only on registered exchanges supervised by regulators; other platforms offering such contracts to Americans break the law |
The figures regulators relied on are similar across countries. ASIC found in reviews in 2017 and 2019 that about 80% of retail clients lost money, and estimated net client losses at licensed platforms at around AUD 490 million in 2018 alone. The FCA reported that in 2017 people in the UK lost over GBP 87,000 a day to binary options scams. The FBI wrote that in some European countries binary options fraud made up 25% of all fraud complaints.
Bans in individual countries did not remove these platforms from the internet: they operate from offshore jurisdictions and advertise where there is no ban. After the ban, the FCA explicitly warned that any firm offering binary options to retail clients in the UK is likely to be a scam.
Platforms advertising binary options to Ukrainians are usually registered abroad and have no licence from the NSSMC, Ukraine's securities regulator. As early as 2019 the Commission specifically warned of a significant risk of losing all money put into binary options, forex trading and crypto exchanges, and stressed that such companies mostly operate from offshore zones. The NSSMC has added several of the best-known binary options platforms to its list of questionable investment projects, which held 477 entries as of August 2026.
For you this means that in a dispute neither the Ukrainian regulator nor a court can realistically help you get your money back: the contract is with a company on the other side of the world that can change its name and domain any day. Before sending money to any trading platform, check it in the NSSMC registers using our guide on how to check a broker.
Some schemes that use the words "trading" and "signals" involve no real trading at all: the figures in the dashboard are drawn, and the "profit" of early participants is paid from newcomers' money. How to recognise such schemes is explained in our guide on Ponzi and investment scams.
| What they say | What it means |
|---|---|
| "90% winning trades", "a strategy with no losses" | With such accuracy the author would have got rich himself; the figure is invented or selective |
| "Earn from USD 1,000 a week with a USD 50 deposit" | A promise of high returns without mentioning risk is a sign of a questionable project under the NSSMC criteria |
| "The signals are free, just sign up with my link" | The author is paid by the platform for your deposit or gets a share of your losses |
| "Trade 30-60 second options" | The shorter the trade, the more trades you make and the faster the negative expectation kicks in |
| "+100% bonus on your deposit" | A turnover condition that blocks withdrawals until the account is wiped out |
| "Your personal manager will help" | A person whose income depends on how much you deposit and lose |
| "Pay a tax or fee to withdraw" | Fraud: if you pay, you lose even more |
If it is trading itself that attracts you, learn on instruments where risk can be controlled: with a licensed broker, a small amount and a loss per trade set in advance. How to limit risk to 1-2% of the account and calculate position size is explained in our guide on risk management. Bear in mind that even there most retail CFD accounts lose money: according to ESMA, 74 to 89%.
If your goal is for your money to grow, the maths works in your favour in long-term investing: regular contributions, diversification and time. You can calculate how strongly compound interest works over 10-20 years in the calculator.
Some people win over short periods, as ESMA acknowledges. But with an 80% payout you have to call more than 55.6% of trades right, and the more trades you make, the closer the probability of an overall loss gets to 100%. Regulators in the EU, the UK and Australia saw exactly this in real data: 74% to 87% of accounts lost money.
In forex trading through a broker you open a position, and your profit or loss depends on how far the price has moved. You can set a stop-loss and close the trade at any moment. In a binary option the all-or-nothing result is decided in the single second of expiry, and the payout is always smaller than the possible loss. Both instruments are high-risk, but in binary options the negative expectation is built into the terms of the trade.
No indicator changes the "plus 70-90% or minus 100%" ratio. To break even, a robot would have to call more than 55% of trades right on one-minute intervals, while the platform, which is your counterparty, controls the quotes and the moment of expiry. If such a robot existed, its owner would have no reason to sell it.
Platforms offering binary options to Ukrainians usually operate from abroad without an NSSMC licence, and several of them are on the Commission's list of questionable projects. In other words, you are sending money to a company that nobody in Ukraine supervises and from which it is almost impossible to recover it through the courts.
Your best chance is if you paid by card and contacted your bank quickly. The other routes (a police report, a complaint to the regulator) matter, but they do not guarantee a refund. And never pay "for recovery" to people who contact you themselves.
Checked against official sources on October 30, 2026. If a figure changes, we update the article and the «Updated» date changes automatically.
This article is for education only and is not investment advice or a call to trade. We do not recommend any platforms, brokers or signal providers. Trading binary options, CFDs and other leveraged instruments carries a high risk of losing all the money you put in.
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