Understand that different contracts have different binary option payout rates. The payouts will vary between 65% and 90% depending on the trade and the broker. Rates lower than those previously mentioned are unusual and you may want to look around at other brokers. There are also brokers who allow the trader to get a partial refund in case they lose on their trade. The percentages of such refunds are usually quite low, mostly around the average of 15% of your initial investment. The following changes might be seen when choosing the full payout option:
Refund: 70% payout, 15% refund possibility, 85% profit trade.
Full Payout: 85% payout with a 0% refund possibility in an 85% payout profit trade.
Let’s say you have initiated a trade with $1500, and the winning percentage of the position is 80%. The trade closes in your favor, or in-the-money. In this case the payout will be $1500 plus 80% of that $1500, equaling $2700. The total payout of your trade will be $2700. You will be notified on your binary option platform of the maximum payout you may get. Based on the above numbers, if the broker provides a refund option, then you will get a 15% refund possibility but a 65% payout. When you win, you get $2475. And when you lose, you still get your 15 refund of $225. If you prefer a full payout, then you can the 80% but you will lose your initial $1500 if the contract expires out-of-the-money.
Remember though, if you get an 80% payout rate from one trade, this doesn’t mean the same will happen on the next trade. Just keep on trading according to your analysis and your plan. Payouts can change from time to time, regardless of your placed money. Take a look at the image below for examples of binary option trade payouts:
The “gamble” scenario is common to new traders. They mistakenly treat the trade like a gamble. They try to hit the target at a single shot, putting all their money on one trade. It is far better if you start building your account with a series of smaller payouts, rather than going for the big one, because in most cases the outcome can be quite catastgrophic for your account.
For example, we have two traders, Trader A and Trader B. Trader A is aiming for the jackpot and chooses to go for huge returns that will help him multiply the size of his account, while, Trader B takes the sensible approach and starts to build his account by starting with smaller trades.
They both have the same goal, however, the style and quantity of trades is very different. The question is, which approach is better?
Experienced traders would tell you that the strategy of Trader B is preferred to that of Trader A, because it is more conservative and utilizes proper risk management.