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A '''binary option''' is a [[finance|financial]] [[exotic option]] in which the payoff is either some fixed monetary amount or nothing at all.<ref name="Breeden, D. T. 1978">Breeden, D. T., & Litzenberger, R. H. (1978). "Prices of state-contingent claims implicit in option prices". ''Journal of Business'', 621–651.</ref><ref name="Gatheral, J. 2006">Gatheral, J. (2006). ''The volatility surface: a practitioner's guide'' (Vol. 357). John Wiley & Sons.</ref> The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays some fixed amount of cash if the option expires [[in-the-money]] while the latter pays the value of the underlying security. They are also called '''all-or-nothing options''', '''digital options''' (more common in forex/interest rate markets), and '''fixed return options''' ('''FROs''') (on the [[NYSE American]]).<ref name="Ipedia">[http://www.investopedia.com/terms/b/binary-option.asp Binary Option Definition] Investopedia. Retrieved 2013-06-30.</ref>
While binary options may be used in theoretical asset pricing, they are prone to [[fraud]] in their applications and hence banned by regulators in many jurisdictions as a form of [[gambling]].<ref name="Globes 12-15-16" /> Many binary option outlets have been exposed as fraudulent.<ref>{{Cite web |url=https://www.fbi.gov/news/stories/binary-options-fraud |title=Binary Options Fraud |website=Federal Bureau of Investigation |language=en-us |access-date=2017-05-30}}</ref> The U.S. [[Federal Bureau of Investigation|FBI]] is investigating binary option scams throughout the world, and the Israeli police have tied the industry to criminal syndicates.<ref name="FBI">{{cite news |last1=Weinglass |first1=Simona |authorlink=Simona Weinglass|title=FBI says it's investigating binary options fraud worldwide, invites victims to come forward |url=http://www.timesofisrael.com/fbi-says-its-investigating-binary-options-fraud-worldwide-invites-victims-to-come-forward/ |access-date=February 15, 2017 |work =[[The Times of Israel]] |date=February 15, 2017}}</ref><ref name="ToIidesofM"/><ref name=":1" /> The [[European Securities and Markets Authority]] (ESMA)
The FBI estimates that the scammers steal US$10 billion annually worldwide.<ref name="TimesofI3417">{{cite news |last1 =Weinglass |first1=Simona |title=As Israel-based financial fraud soars, police swoop on 20 suspects as part of global, FBI-led sting |url= http://www.timesofisrael.com/as-israel-based-financial-fraud-soars-police-swoop-on-20-suspects-as-part-of-global-fbi-led-sting/ |access-date=March 4, 2017 |work=The Times of Israel |date=March 4, 2017}}</ref> The use of the names of famous and respectable people such as [[Richard Branson]] to encourage people to buy fake "investments" is frequent and increasing.<ref name=branson>{{cite news |url= https://www.theguardian.com/business/2017/may/17/richard-branson-virgin-says-scammers-are-using-his-name-to-dupe-investors |title=Richard Branson says scammers are using his name to dupe investors |work =The Guardian |date=18 May 2017 |author=Press Association |access-date= 18 May 2017}}</ref> Articles published in ''[[The Times of Israel]]'' newspaper explain the fraud in detail, using the experience of former insiders such as a job-seeker recruited by a fake binary options broker, who was told to "leave [his] conscience at the door".<ref name="israeltimes1"/><ref name="israeltimes2"/> Following an investigation by ''The Times of Israel'', [[Cabinet of Israel|Israel's cabinet]] approved a ban on the sale of binary options in June 2017,<ref>{{citation |title=Israel cabinet approves ban on sale of binary options |work =Reuters |author=Tova Cohen |date=June 18, 2017 |url=https://www.reuters.com/article/us-israel-binaryoptions-lawmaking-idUSKBN19906C |access-date=2017-07-15}}</ref> and a law banning the products was approved by the [[Knesset]] in October 2017.<ref name="AtLast">{{cite news |last1=Weinglass |first1=Simona |title=Israel bans binary options industry, finally closing vast, 10-year fraud |url=https://www.timesofisrael.com/israel-bans-entire-binary-options-industry-finally-closing-vast-10-year-fraud/ |access-date=October 24, 2017 |publisher=[[The Times of Israel]] |date=October 23, 2017}}</ref><ref name="Knesset ban 10-24-17">{{Cite news |url=https://www.haaretz.com/israel-news/business/1.818782 |title=Israel Bans Binary Options Industry That Defrauded Millions |last=Tomer |first=Uri |date=2017-10-24 |work=Haaretz |access-date=2017-10-24 |language=en}}</ref>
On January 30, 2018, [[Facebook]] banned advertisements for binary options trading as well as for [[cryptocurrencies]] and [[initial coin offering]]s (ICOs).<ref name="blomm13018">{{cite news |last1=Frier |first1=Sarah |last2=Verhage |first2=Jules |title=Facebook Bans Ads Associated With Cryptocurrencies |url=https://www.bloomberg.com/news/articles/2018-01-30/facebook-bans-ads-associated-with-bitcoin-cryptocurrencies |access-date=February 7, 2018 |work =Bloomberg |date=January 30, 2018}}</ref><ref name="FT013018">{{cite news |last1=Cornish |first1=Chloe |title=Facebook and regulators move to halt cryptocurrency scams |url=https://www.ft.com/content/9c1050ca-05f8-11e8-9650-9c0ad2d7c5b5 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/9c1050ca-05f8-11e8-9650-9c0ad2d7c5b5 |archive-date=2022-12-10 |url-access=subscription |access-date=February 7, 2018 |work =[[Financial Times]]|date=January 30, 2018}}</ref> [[Google]] and [[Twitter]] announced similar bans in the following weeks.<ref name="EU1">{{cite news |title=European Union bans binary options, strictly regulates CFDs |url=https://www.timesofisrael.com/european-union-bans-binary-options-strictly-regulates-cfds/ |last1=Weinglass |first1=Simona |date=March 28, 2018 |access-date=March 21, 2019 |publisher=The Times of Israel}}</ref>
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