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How to recognise and evade options scams

Published: Jun 14, 2022

Options scams are becoming increasingly common in the forex market, as fraudsters target investors looking to make a quick profit. Options scams typically involve promising high returns with little or no risk and require upfront payments.

Fraudsters will often use high-pressure tactics to get victims to invest and may even threaten legal action if they don’t comply. If an options scam has targeted you, it’s essential to know how to recognise the signs and the actions you can take to protect yourself.

How do options scams work?

Options scams typically involve investing in options, a contract that allows the holder to sell or buy an asset at a set predetermined price within a specific timeframe.

For example, you may be promised the opportunity to make a significant profit by investing in an option that will expire in a few days. However, options are complex financial instruments and carry a high risk. In reality, it’s doubtful that you would be able to make such a significant return in such a short period without taking on significant risk.

Fraudsters will often guarantee returns or suggest that your investment is low risk, even though this is not the case. They may also claim that their investments are ‘hedged’ or ‘insured’ against losses when they are not.

Signs of an options scam

Options scams can be challenging as they often look like legitimate investment opportunities. However, there are some signs that you can look out for, which include:

● High-pressure sales tactics – you may be contacted out of the blue and pressured to make a decision quickly

● Guaranteed or low-risk returns – options are high-risk investments, and there is no such thing as a guaranteed return

● Upfront payments – you may be asked to pay money upfront to invest or to ‘cover costs’.

● Complex investment products – options are complex financial instruments that most people don’t understand

When you see these signs mentioned above, it’s essential to be cautious and do your research before investing. Be wary of investing through unregulated firms, as this could make it challenging to get your money back if things go wrong.

How to protect yourself from options scams

Here are the crucial steps that you can take to protect yourself from options scams, which include:

● Researching investments – don’t invest in anything that you don’t understand, and be wary of complex investment products

● Checking credentials – only deal with regulated financial firms and make sure that the person you’re dealing with is authorised to give financial advice

● Asking for references – ask for references from other investors who have used the firm in question

● Getting independent advice – if you’re not sure about an investment, seek independent financial advice

If you are a UK forex trader and suspect you have been the victim of an options scam, you should contact the Financial Conduct Authority (FCA) in the UK or your local financial regulator. You should also immediately report the scam to Action Fraud, the UK’s national fraud reporting centre.

What to do if you spot an options scam

If you spot an options scam, there are a few steps that you can take:

● Report it – you should report the scam to the FCA and Action Fraud.

● Don’t pay – don’t make any payments to any unknown entity, as you’re likely to lose your money and won’t be able to get it back.

● Stop all contact – if you’re being pressured to make a decision, say no and end all contact with the person or firm in question.

Conclusion

By following these steps, you can help to protect yourself from options scams. If you think that you may have been the victim of a scam, it’s essential to report it so the authorities can take that action, and finally, don’t let anyone pressure you into making an investment decision. Do proper research before committing to anything. Before investing in options trading, new traders should always use an experienced and reliable online broker.

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