Binary Options Payouts
Binary trading is unusual in investment terms; before you commit to any investment you will be informed of the possible payout in percentage terms. This means that if you predict the correct result you know you will receive this percentage plus your initial investment back. In general binary options payouts are some of the highest returns on investment you can locate; of equal importance is the fact that you always know exactly how much you could lose.
This can be summarized in the following example:
If you place a trade of $2000 with an eighty percent rate of return and your prediction is correct then you will receive your $2000 back plus eighty percent; which is $1600. The total binary options payout in this example is $3600. If the trade goes against you, you would lose the $2000.
The Binary Options Payout Rate Varies
Not all binary options have the same payout rate; they can vary from broker to broker and on different types of trade. In general, the higher the risk the higher the potential payout will be. The majority of brokers have payout rates between sixty and ninety percent. If you are using a broker offering less than this you should consider changing binary broker.
It is possible to get some of your funds back after a trade has not gone in your favor. However, the amount you will receive is usually just ten percent of your initial investment; in the example above you would receive $200 of your original $2000 back. However, if this incentive is added into your binary options contract you are likely to see a lower payout rate.
There are also some trades which will offer returns as high as five hundred percent. However, these will come with a strict set of terms and a much higher risk. They are referred to as high yield trades.
The Proper Approach To Binary Options Payouts
Once you realize how much funds you can generate in a single trade you may find it appealing to place large trades in the hope of generating significant returns. The alternative is to place many smaller trades and build the funds in your account and a more cautious rate. It is difficult to know which the best approach is:
If one trader decides to grow his account rapidly he may place a trade of $1000 and gain a binary option payout of $800 profit almost instantly. The second trader, who adopts a more conservative approach places $100 trades and generates $80 each time his prediction is correct. However, the second trader must get ten trades right to catch up with the returns that trader one has already generated. One of these ten trades wrong will cost them $100 and mean winning and additional two to match trader one’s profit.
However, if trader one gets it wrong, they will lose their initial $2000 instantly. This could wipe out all their funds and force them to either quit or invest more money. Unless you are guaranteed to have a successful trade you are more likely to generate payouts and increase your wealth in the long term by taking trader two’s more cautious approach.
The more you understand regarding how a binary option payout is calculated and the risks involved the easier it will be for you to develop a strategy which will allow you to have more successful trades than unsuccessful ones. Of course, you should factor in elements like partial refunds on trades out of the money. Although these lower your normal rate of return they can provide you with valuable funds if you have a string of unsuccessful trades. The conservative approach should allow you to reach your goal gradually; as opposed to one hit and miss go!