The National Stock Exchange of India (NSE) on Monday warned investors to refrain from dealing in unregulated derivative products after it observed some investors falling prey to it.

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NSE

"The exchange has noticed some unregulated platforms/websites offering trading in certain unregulated derivative products called Contracts for Difference (CFD)/Binary Options," NSE said in an advisory.

"Investors falling prey to the promises of high/exorbitant returns by these websites/platforms may eventually lose money heavily. Hence, Investors are advised to refrain from dealing/investing in unregulated products offered by such unregulated internet-based trading platforms," the exchange added.

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CFD is a contract between a buyer and a seller in derivatives trading. It stipulates that the buyer will pay the seller the difference between the current value of an asset and its value at contract time.

CFD is cash-settled and permits traders and investors a chance to profit from price movement without owning the underlying assets.

The binary option is a type of option with a fixed payout in which an investor predicts the outcome from two possible results. If the prediction is correct, the investor receives the agreed payout. If not, the investor loses the initial stake.

(With PTI inputs)