How Much Money Can You Make Trading Binary Options

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How To Make Money Trading Binary Options

Now that we have a basic idea on how binary option trades work, let’s take a look at a simple example.

Let’s say, you decide to trade EUR/USD with the assumption that price will rise.

You then look at your trading platform and see that the broker’s payout is 79% on a one hour option contract with a target strike of 1.3000.

After much deliberation, you finally decide to buy a “call” (or “up”) option and risk a $100.00 premium.

You could say it’s similar to going “long” on EUR/USD on the spot forex market.

Ending Scenarios After Entering a CALL Option Gain/Loss
Expiry price is above the strike price
(in-the-money)
$100.00 x 79% = $79
$100.00 + $79.00 = $179.00
You gain $179.00 on your account.
Expiry price is equal to or below the strike price
(out-of-the-money)
You lose your stake and your account declines by $100.00.

As you can see from the calculations above, the risk you take is limited to the premium paid on the option.

Payouts in Binary Options

Now that we’ve looked at the mechanics of a simple binary trade, we think it’s high time for you to learn how payouts are calculated.

More often than not, the payout will be determined by the size of your capital at risk per trade, whether you’re in- or out-of-the-money when the trade is closed, the type of option trade, and your broker’s commission rate.

In the example given above, you bet $100 that EUR/USD will close above 1.3000 after an hour with your broker offering a 79% payout rate. Let’s say that your analysis was spot on and your trade ends up being in-the-money. You would then get a payout of $179.

$100 (your initial investment) + $79 (79% of your initial capital) = $179

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

Easy peasy, right? Don’t get too excited just yet! You should know that there’s no one-size-fits-all formula for calculating payouts. There are a few other factors that affect them.

Factors in Payout Calculations

Each broker has its own payout rate. For starters, Forex Ninja’s intel shows that most brokers offer somewhere between 70% and 75% for the most basic option plays while there are those who offer as low at 65%.

Various factors come into play when determining the percentage payout.

The underlying asset traded and the time to expiration are a couple of big components to the equation.

Next, the broker’s “commission” is also factored into the payout rate. After all, brokers are providing a service for you, the trader, to play out your ideas in the market so they should be compensated for it.

The commission rate does vary widely among brokers, but since there are so many binary options brokers out there (and more coming along), the rates should become increasingly competitive over time.

When a Binary Option Trade is Closed

As mentioned before, binary options are typically “all-or-nothing” trading instruments in that the payout or loss is only given at contract expiration, but there are a few brokers that allow you to close a binary option trade ahead of expiration.

This usually depends on the type of option, and usually it’s only available within a certain timeframe (e.g., available 5 minutes after an option trade opens, up until 5 minutes before an option expiration).

When trading with a binary option broker that allows early closure of an option trade, the value of the option tends to move along with the value of the underlying asset.

For example, with a “put” (or “down”) option play, the value of the option contract increases as the market moves below the target (strike) price.

This means that, depending on how far it has moved passed the strike, the closing value of the option may be more than the risk premium paid (but never greater than the agreed maximum payout).

Conversely, if the underlying market moved higher, further out-of-the-money, the value of the option contract decreases and the option buyer would be returned much less than the premium paid if he/she closed early.

Of course, in both cases, the broker commission is factored into the payout of an option trade when closed early.

So before you decide to jump head first into trading binary options, make sure you do your research and find out what your broker’s payout rates and conditions are!

Can you make money in binary trading?

“Quick Ways to Get Rich Online,” this is a heading that usually Ponzi schemes use, but recently it is being used to advertise a new form of investment, which is called binary options trading. Any advertisement that has the words “GET RICH QUICK” can sound melodious and at the same time, phony.

We all hear from time to time how authorities bust Ponzi schemes in which crooks try to rob innocent people. Binary options trading is also advertised as if you can get rich in a matter of few days and that even a child can execute binary trades. Yes sure, using the trading interface is very easy and a child can in fact use it but that does not mean this child can actually WIN one trade after another. Trading in binary options platform is a child’s play because the interface is user friendly but Winning trades consistently is a completely different story.

Get rich quick

Binary options is advertised as the only genuine system that lets users earn preposterous amounts of money in ridiculously short period of time. Advertisers try to implicate as if you can make $350 every 60 seconds, nonstop; if it were true then this would truly be an astonishing business.

However, does it make any sense? Can every trader make tons of money? Who is actually paying all the money or the profit?

The answer to these questions is simple and it will make everything become crystal-clear. Whenever a trader wins a trade, the broker has to pay the profit from its own pocket. This is the truth and do not believe in any other theory that anyone tries to feed you.

Nevertheless, there is hope. There are reliable and honest companies who do not mind paying profits. Compared to the honest, the number of dishonest brokers is high but with a bit of online research, you can find the good-guys.

Binary options let users trade in currency pairs and stocks for various predetermined time-periods, minimal of which is 15 seconds. Executing trades is straightforward. The system uses user-friendly interfaces, which even an 8 years old kid can operate without having to read any instructions. However, winning trades is Not easy.

You need a good strategy

The first challenge is finding a trustworthy broker; secondly, you need to find a binary trading strategy, which you can use to make profits consistently. Without an effective strategy, there is no way you can make money in binary trading.

The odds are against traders and if your strategy is to trade with guesses then eventually, you will lose all your money. Binary options platform is merciless, which will suck in all your money and will compel you to invest more and more, while you are continuously losing money.

If you win a trade, you get 60% to 89% profit. This is a cunning system, which clever gamblers have designed in an extremely devious way. If you want to outsmart it, you must procure a real and working strategy that you can use to win at least 80% trades. Options trading can provide the fastest way to generate income, there is no doubt about it, but to keep the profits flowing, you must win trades consistently.

Featured Comments:

I trade 60 second expires
I trade 1% of my account balance per trade
If I lose I martingale
If I lose 15% of my account balance (by martingale) I write this money off and return to 1% trades and re-grow my balance.

This has proven profitable for me, and I am only a novice. In my opinion binary options can be profitable.

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Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
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  • Binomo
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    Good Broker For Experienced Traders!

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