The Monetary Authority of Singapore this week issued a warning to investors on investing in binary options.

Singapore’s financial watchdog has warned investors about trading binary options through unregulated platforms following a surge in complaints from investors who have suffered losses from such investments.

A binary option is a type of option contract that references an underlying instrument such as stocks, commodities, currencies and interest rates. Unregulated platform providers often use marketing ploys and misleading catchphrases such as “trading with zero risk” to entice investors to invest.

Despite frequent promises of low investment risk and exceptionally high returns, binary options are, in fact, speculative and risky investment instruments.

“Before making any investment decisions, investors should think carefully about the claims being made about the products offered – if the touted ease of making significant profits sound too good to be true, it probably is,” the Monetary Authority of Singapore said in a statement this week. “Always assess whether the investment being offered is suitable for you, in light of your investment objectives and personal circumstances.”

MAS warns that many unregulated binary options trading platforms are fraudulent and based outside of Singapore. As a result, investors who choose to deal with such entities are “unlikely to recover any monies lost” and will not have access to dispute resolutions, according to MAS.

The regulator suggests that investors check entities are regulated by MAS before investing with them. Investors can do this by consulting the regulator’s financial institutions directory, which lists all firms regulated by MAS.