Binary Options Payout

Financial_graph_red_file_calculatorTraders are attracted to binary options trading for a variety of reasons, with the simplicity of trading and the potential to earn large payouts being just two of them. As with any other form of financial investment, trading in binary options is carried out with the singular aim of earning money. With this type of trading, the payouts on offer can be quite substantial. Although the payouts offered to traders vary greatly depending on the broker and the type of option, it is normally a fixed percentage of the initial investment and is known beforehand. When a trader makes a correct price action prediction, the option expires in the money and the investor receives a payout. On the other hand, when a trade ends unsuccessfully, the trade is said to end out of the money.

Payout For In The Money Outcomes

When a trader engages in trading binary options, they face the prospect of 2 possible outcomes. First off, they could execute a successful trade contract, which correctly predicts how a financial asset’s price will have moved by the expiry of the trade. When the prediction the trader makes is correct, then the trade is said to have expired ‘in the money.’ In this case, the binary options trader will secure a profit, which would be a percentage of their initial investment. In case the trader executes a Call option, it means that he/she predicts that the price of the asset will be higher by the time the option expires. If a price increase occurs by the time the option expires, it is an ‘in the money’ outcome for a Call option. Conversely, a Put is a prediction that the asset value will drop. A lower asset price on expiration means the contract is ‘in the money’ and the trader earns a payout.

Payout For Out Of The Money Outcomes

On the other hand, if the asset price action is in the opposite direction to the trader’s prediction by expiry of the contract, it means that the trade ends ‘out of the money.’ For example, when a trader executes a Call option, they predict that the price of the asset will have declined by a predetermined expiry time. However, if the price decreases instead, the options contract would expire ‘out of the money.’ The opposite is also true; if a trader purchases a Put option predicting a drop in the asset price, and instead the price finishes higher, it is also considered ‘out of the money.’ Out of the money outcomes commonly result in the trader losing their investment. However, some brokers offer traders a small percentage of their investment as an out of the money payout.

Final Word

Ultimately, what keeps traders from all over the world hooked to the binary options trade is its potential to earn them significant sums of money as payouts. Because the precise amount of money offered as a payout is known beforehand, a trader can gauge their potential profits and losses.

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