How much money you will earn on a winning binary options trade will depend on two factors. First, how much you invested in the trade, and second, a prearranged payout percentage offered by your broker.
The first you can obviously decide for yourself, depending on your budget and the risk you are willing to take. The second depends entirely on your broker. Binary brokers operate with set payouts for each of the different options they offer.
These payout rates vary greatly from broker to broker. There is a lot of money to be made by choosing a broker that offers a higher payout than the competition. Read this article to find out how you can secure yourself high payouts.
What are binary option payouts?
A binary option payout is the percentage of your investment that the broker will pay out for a winning binary options trade.
The size of the payout varies between different types of binary options, and from broker to broker. Generally speaking, the more difficult a binary option is to predict, the higher payout will you receive.
This means that a simple up/down option, one that simply requires you to predict whether the prize of an asset will move up or down over the course of a set timeframe, will offer a relatively low payout. A more challenging option, such as a touch option where you predict that the price of an asset will reach a specific point during a predetermined time period, will offer a far greater payout.
Usually, a high/low option will offer a payout of about 80 % to 90 % of the sum invested. A touch option can be rewarded with payouts upward of 400 %.
Strategies for binary options payouts?
The big strategic consideration to keep in mind when considering binary options payouts is win frequency. How many times will you need to win to earn a healthy profit with a certain type of option, with its specific payout?
Obviously, it would be great to win a high percentage of touch options with payouts of several hundred percent. However, the laws of averages determine that this is not likely to happen, and certainly not likely enough to warrant an investment.
So, what any trader has to do is assess risk, and make a strategy on this basis. It is clear that you will win a much higher percentage of high/low options than options with higher payouts. So, what is the better strategy: win frequently with a payout of 80 %, or win more rarely with a payout of 400 %?
There is no set answer. This is a question of what sort of trader you are: risk-averse, or high-risk. Both strategies have benefits and drawbacks. Our advice is to trade according to you personality. If you find frequent low wins unstimulating, trade with higher risk. If you find frequent losses down-heartening, trade with lower risk.
The one thing we can say for certain, is that is pays to stick with your chosen strategy. Either trade low-risk / low payout options, or high-risk / high-payout options. If you switch between the two you risk experiencing the drawbacks of both, and missing out on their respective plus points. You have to be consistent, patient and invest long-term in order to make trading in binary options work for you.
Some things to consider regarding binary options payouts
When you look at binary brokers, you will see that they all list their respective payouts prominently as part of their marketing. They know that traders are looking for the highest payouts, and compete to offer the most enticing deal.
At first sight, differences in payout percentages between brokers can seem insignificant. What, after all, does it matter if I win 80 % of my investment on a trade, or 81 %? The answer is a lot more than you probably think.
If you can choose between two brokers, and there’s a 2 % difference between their payouts, this will make a huge impact on your earnings over time. Let’s say you make 6 trades per day. Over the course of 20 trading days, with a win percentage of 70 %, that 2 % difference will result in an additional payout of 2160163%. That is more than 2 million extra percentage points, you earn without improving your strategy or anything else – purely an effect of compound interest.
Having said all of that, it is important not to get greedy in this business. When choosing a broker there are several things to consider. Yes, the size of the payouts on offer is obviously very important, but other considerations should be taken into account also.
There is nothing to be gained by opening an account with a broker that offers huge payouts, but do not offer the assets, markets, types of options or bonuses you are after. Not to mention security considerations.
Our advice is to always vet any broker you are reviewing carefully, and not to be blinded by seemingly alluring payouts..