How brokers make money with binary options?

When it comes to trading it means that it is the trader’s fault. The trader analyzed the trade and place the order, identified levels so the trader is to blame and not the broker for allowing the trader to place a trade.

I agree with TheLastBear - when a trader loose a trade he should only blame himself. I also think that some brokers are scams , but it doesn’t mean that we can blame them for the mistakes we make.

[QUOTE=“Red Uku;484995”]thanks you all for sharing your opinions.

This is very interesting rawand, yes please post more when they answer !

I actually was wrong when at first considered return rates were fixed. The guy from tradologic said they manage the risk by managing the price of their options. Translated to binaries, the parameter they can adjust is the return rate. I looked at it as fixed per broker/per asset/expiration time, but they can (and probably do) change it whenever they want.

If we bring the first example back and genelarize it from the broker perspective, we get something like this :

raw profit = Sum,i,k(
amount bet (i)

  • (1 - asset return rate (k) when out of the money) * is bet (i) out the money
  • (0 - asset return rate (k) when in the money ) * is bet (i) in the money

He just observes amount_bet(i), is_bet_in_the_money_(i) / (out) (=rate at which customers win or lose) and controls the two return rates. If he has enough client, those distributions will likely be gaussian (if not that doesn’t change the problem). He can make the assumption that, let’s say next week bets, will be disttributed the same as what observed until now. If distributions are gaussian (or any symmetrical) he simply use means to calculate what return rate will assure him positive profit.
So yes, he not only makes money as long as return rates respect the expected ratio of amounts bet by options winners and losers, but also knows how much he’ll make.

Now the other aspect many of us are interested in : what if the rare case of a more-enough-than-average-trader occurs ? The broker will want to know the probability of a one his client winning millions (especially without having the symetric client who lost same millions).
That’s just the study of marginal cases.
If the distributions are known, you can easily calculate the probality. He may also choose to insure himself against those cases. He may just choose not to be honest and not to pay this lucky client.

In conclusion : the broker controls easily how much money he makes out of binaries. Clients making money is then not a problem. BUT the rare client making too much money is a problem for him. The threshold of what if marginal depends on brokers, and it’d be very interesting to learn more about those considered by brokers.[/QUOTE]

i talked also with spotoptions to become a partner
he said that when clients lose you make money
i said what if clients make more than i have
he said thats why you should have at least 150 customers a month, to make balance between losers and winners
if you talk with bancdebinary which are spotoptions partner
they will say that we make money when clients make!!!
i don’t trust any broker for binaries
if you want to open account
there is a large broker who provide binaries
they have custom options>fast options
i couldn’t talk to them because they don’t accept clients from my area
i like to trade very fast
they offer 2 min trading options same as binaries
but my question is
does that mean we can trade every 2 min
or it depends on their expiry time?
the didn’t answer me because of the same reason
are you interested in trading binaries or you are just looking for researches ?

No trader can say for sure if he has entered into a wrong trade. As the markets can take a turn at any point of time. But then a good trader is one who will learn from his bad trades as well as from his past mistakes :slight_smile:

I think it depends on the binary option broker, the good ones earn when clients earn (just like good forex brokers), the bad ones want clients to lose in order to earn.

You are mistaking my friend - all binary options brokers are earning when the trader loose and loosing money when the trader wins. It doesn’t mean that they are “bad brokers”, you can make profits with them anyway. Bad brokers (I like to call them scams) are the brokers that will not pay you when you want to withdrawal your profits!

Well you do not know the inside things. These binary option brokers have a team that is trading against the traders so that the broker always remain in more than 50% wining.

The better binary option brokers employ traders who also trade the markets and generate revenues for them.

I don’t think it’s true - where did you get this information from?
How can the broker have a team of pros that trades against me if I’m the one who makes my trades???
I think that it is much more simple - the basic odds are more than 50% to the broker anyway. The max payout you get per trade is always less than what you risk - since most people have no idea not they are doing the odds are higher than 50% for the broker.

Very interesting discussion about binary option brokers.

Binary options trading is fixed odds betting. Literally, by randomly clicking on the call and put buttons, you have a 50-50% chance of wining. However, if you put some thought into it, in my experience, these odds simply have to change to your favour. Especially if you combine binary options trading with some of the known and proven strategies. In any case, it’s always up to you. My experiences have been great. About the percent of the trades that you need to win, it’s easy to calculate. And, honestly, not that hard to achieve. Just speaking my mind, do not mean to offend.

Options only look easy to make money but we do not have control over the market so it is much riskier than the forex market. Moreover these brokers are manipulating a lot and causing loss to many traders.

The risk is the same, those who know what they are doing will succeed others will fail. It depends on the individual and not the asset.

Couldn’t say it better my friend :60:

Exactly right, and the more you practice the easier it gets to achieve positive overall balance. And if there is something that internet is full of, it’s the different ways to learn how to trade binary options, such as tutorials, guides, FAQ’s, tips. Even the brokers get involved with binary options signals and demo accounts. Every trading success requires commitment.

They makes profit when you lose your money and they are unprofitable if you are making profit.

[QUOTE=“TanGIRL;489349”]They makes profit when you lose your money and they are unprofitable if you are making profit.[/QUOTE]

Not necessarily… Many brokers don’t actually trade against you, they either offset your position with another if their clients positions or they use liquidity providers.

They profit off the spread… And it’s to their advantage that their clients profit as that will increase the number of trades the clients make and the position volume, both increase the brokers profit from spread.

Seems interesting, can you explain a bit more ?

You are mistaking my friend. Binary options brokers don’t have spreads! so your theory have a big hole…
The only time the broker will not trade against you is when your trade (or a total of all current trades with same asset & direction) are to big for them to afford losing.

Yes, I agree with you. There is no success without commitment.