SEC accuses three men of $100 mln binary option scam

gaussian said:
I said somehow for a very specific reason. The merits of calling binary options anything but gambling are suspect at best. NADEX should be regulated as a casino and not a legitimate trading firm. It is the trading equivalent of horse races. If you lose you do not own anything, and cannot call them and say "execute my option and deliver to me my stock" within the timeframe allotted (as far as I know). This treads awfully close to how real old-time bucket shops worked. In fact, it's almost a word-by-word redefinition. In theory, if I called AMP and asked for delivery of 5000 bushels of corn - it could happen. I would have to put up millions in performance bonds, but I could do it. If I had a weekly option at TDA and executed it I would get the underlying delivered to me without question. Last I checked, NADEX does nothing of the sort.

To me, NADEX is just a bucket that paid the CFTC enough to look the other way. Whereas the CFTC may prevent them from outwardly pocketing cash illegally - they are certainly operating the same business model as every other fly by night binary options shop and for that they are very deserving of criticism. Regulate them like a casino and you will hear no complaints from me. The house edge is so absurd it would be crazy to think they aren't taking the other side of every single trade.
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That's interesting logic, how about you deliver me 100 contracts of VIX? How about 100 contracts of Case Schiller Home Prices. How about 100 contracts of PJM Western Hub Real-time Peak MWH? I could go on and on and on about non-deliverable futures, fops, and even the cash settled CBOE index options on SPX, RUT, and the Nasdaq 100. Clearly, your definition of gambling bucket shops based on deliverability leads just a tad bit to be desired?
The real question though is one I already asked but you seem to have missed. You can make offers inside the spread on Nadex now. You can set yourself up as a full fledged market maker with only $500K in capital (I double checked that number). If there's this massive "house edge" you're so sure is there, why in the world aren't you (and everyone else) taking advantage of it by acting in the same capacity as "the house"?
And while you're not going to get sued for defamation here on ET, words do have consequences and you're a generally intelligent and civil guy. Claiming that Nadex "paid the CFTC enough to look the other way" is a pretty damn serious allegation to make without a scintilla of evidence, don't you think? Wouldn't you think such an unsupported allegation would reflect poorly on you, at the very least?
 
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Sig said:
Clearly, your definition of gambling bucket shops based on deliverability leads just a tad bit to be desired?
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Yeah that's fair. I wrote what I said hastily.

Sig said:
ou can make offers inside the spread on Nadex now. You can set yourself up as a full fledged market maker with only $500K in capital (I double checked that number). If there's this massive "house edge" you're so sure is there, why in the world aren't you (and everyone else) taking advantage of it by acting in the same capacity as "the house"?
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I don't have 500k capital. If I did, there are better and easier ways to make money (for example making markets in futures is probably what I would do).

Sig said:
Claiming that Nadex "paid the CFTC enough to look the other way" is a pretty damn serious allegation to make without a scintilla of evidence, don't you think? Wouldn't you think such an unsupported allegation would reflect poorly on you, at the very least?
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It's opinion, so I seriously doubt NADEX would take my criticism very seriously. Your response is fair and I clearly misspoke. I have an unfounded bias against binary options vendors.

I'll concede and I probably don't know enough to talk about it. Perhaps you can give me a reason that it's not glorified gambling. Can you hedge usefully on NADEX? The purpose of speculation is to provide liquidity to hedgers. Why would I hedge on NADEX? It seems like a gambling operation to me. For reference, I am a speculator myself. I understand my role (generally). However, what does NADEX provide that another options platform doesn't? Why can't I build my own binary options? I just do not see the utility in speculation on NADEX.
 
gaussian said:
...I don't have 500k capital. If I did, there are better and easier ways to make money (for example making markets in futures is probably what I would do).
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I liked your post there, because you fessed up. But you think you can make a futures market with half a million? Mruhahah! Yer smoking the funny stuff I believe.
 
gaussian said:
Yeah that's fair. I wrote what I said hastily.



I don't have 500k capital. If I did, there are better and easier ways to make money (for example making markets in futures is probably what I would do).



It's opinion, so I seriously doubt NADEX would take my criticism very seriously. Your response is fair and I clearly misspoke. I have an unfounded bias against binary options vendors.

I'll concede and I probably don't know enough to talk about it. Perhaps you can give me a reason that it's not glorified gambling. Can you hedge usefully on NADEX? The purpose of speculation is to provide liquidity to hedgers. Why would I hedge on NADEX? It seems like a gambling operation to me. For reference, I am a speculator myself. I understand my role (generally). However, what does NADEX provide that another options platform doesn't? Why can't I build my own binary options? I just do not see the utility in speculation on NADEX.
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At one point Nadex was the only place that had daily options expirations, and there were strategies that benefited/used that. To be honest now that CBOE has added MWF PM expirations, combined with Nadex raising their commissions (they used to cap them per transaction), I don't really use them much any more. But at one time they were offering something you couldn't get elsewhere. And binary options are a product you can go down to GS and get to the tune of hundreds of millions of dollars in notional, so obviously they have legitimate uses. To be fair to your position, no doubt plenty of folks use Nadex to gamble as well, and if you don't have any qualms about parting them with their money then there is money to be made trading against them.

Sincerely appreciate your civility as well, apologize if I came off a bit snarky in that last post.
 
Sig said:
It's a little annoying when folks lump Nadex with the unregulated bucket shops. They aren't "somehow regulated", they're regulated by the CFTC same as every other futures exchange. If you know they're doing something that violates US law, it's incumbent on you to report the specifics. If you don't have any specifics, then one wonders why the hate? If you think their model allows market makers to take advantage of the exchange then become a market maker and rake in the big bucks, I think the minimum capital requirement is ridiculously low like $500k. They most certainly aren't flat out taking people's money per the OP.
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Nah, its a confusion, the guys you mentioned are great, but binary options are really a crap. I think they have to be regulated same as casinos
 
I am thinking of opening a binary options firm which has a physical presence. It would be a large room full of mini trading workstations that take cash or credit card swipe. Active traders get comps and there would be low cost food available,drinks etc. this should not be a problem since its a trading firm.
 
KINGOFSHORTS said:
I am thinking of opening a binary options firm which has a physical presence. It would be a large room full of mini trading workstations that take cash or credit card swipe. Active traders get comps and there would be low cost food available,drinks etc. this should not be a problem since its a trading firm.
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That is definitely a great idea. Haha. I love it
 
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