Binary options

High/low – you predict whether the price will be higher or lower than the current value (the strike price) when the option expires.

One touch option – you predict whether you expect the price to hit a target (a strike price) above or below the current price. If the price hits the target just once before it expires, you’ll make money. If it doesn’t hit the target, you’ll lose the money you’ve invested.

Range option – you select a price range you expect your asset (for example a share) to trade within until the option expires. If the price stays within the range, you receive a fixed payout. If it moves outside the range, you lose your investment.

Binary options may promise to make you money quickly, but like gambling, you could lose all of the money you’ve invested.

Things to look out for

Making money from investing in binary options isn’t as simple as it looks

Most online platforms make binary trading look easy by promoting a simple three-step process – online tutorials, educational materials and pop-up chat boxes. Don’t be fooled. Guessing the short-term movements of a share price, currency, index or commodity is extremely difficult, even for professionals. It’s possible to lose a lot of money trading in this way.

Options offering high payouts (up to 500%) are likely to be structured in a way that makes the chances of winning quite low

If it seems too good to be true, it most likely is.

Some trading platforms have refused to credit customer accounts or reimburse accounts after accepting money

Most foreign traders are unregulated. This means there’s little oversight and there’s a higher risk the provider may default on its payments or the investment could be a scam. See our avoid scams page for tips on how to protect yourself.

By investing in binary options, there’s a higher chance you could become a victim of fraud

Online platforms may not be regulated, which makes fraudulent behaviour much easier. We’ve been advised of platforms manipulating software so the provider doesn’t have to pay out. Examples include changing the duration of the trade so it generates a loss or cancelling the trade altogether.

Another example of fraud is identity theft

This is where online platforms use or share the customer information they collect, without the customer’s permission.

• Make sure your provider is licensed by us. A licensed provider must meet the minimum standards required by law, and we monitor them. If they don’t have a licence, don’t deal with them. 
• Take care when providing copies of your credit card, driver’s licence or other personal data online – particularly if the business is based overseas and not licensed in New Zealand. This puts you at risk of identity theft.
• Be aware of providers offering ‘training’ and ‘tools’ that promise a particular product or technique giving access to easy money. While software programmes and training courses can teach you how to make binary trades, no person or programme can ever accurately predict how those trades will move.
• Do your research, particularly if you decide to invest in an overseas business not licensed in New Zealand. It’s often impossible for you to recover your money if an overseas investment turns out to be a scam.