In recent years, binary options trading has become a true form of investment. This product is regarded on the same basis as other investments in the financial markets such as Forex or CFD trading. There are some forex and binary options brokers that offer these different types of trading; brokers who offer their traders the opportunity to speculate on the forex market or stock markets are generally remunerated based on commissions called “spread”. On the other hand, binary options brokers that offer trading in a simplified manner operate in a different way.
This fact leads many traders to ask the question: “How do binary options brokers earn money?”. It is only logical that such brokers earn money otherwise the activity of these brokers would have already ceased a long ago. While this question remains unanswered for many traders, binary options brokers earn money in various ways, depending on their business model. We will attempt to unveil the mystery and bring you the answers to this famous question by referring here-below the economic model adopted by most regulated binary options brokers. Such economic model is based on the activity and transaction volumes conducted by traders.
This is the principal way in which binary options brokers are remunerated and derive their income from the market. They earn money based on the activity of their clients and the volume of trades that they execute.
To illustrate how binary options brokers generate money, we will simply consider the following concrete example;
– If a binary options broker sees that 4,000 of its traders speculate simultaneously on a financial asset such as the main most traded currency in the world, the EUR / USD.
– Let us assume that 150 out of these 400 traders bet on average $100 each given that the price will be on a rising trend at the end of a one-hour maturity and the other 250 traders on this sample group of 400 traders speculate on the plummeting of the price, also $100 each on average.
– The total amount invested by the binary options traders in the market through this broker is thus $40,000 (150 x $100 + 250 x $100) (i.e. $15,000 + $25,000).
– The binary options platform shows a return on investment of 85% if a trader has made a prediction that proves to be correct.
> At the end of the 60-minute maturity, we see that the EUR / USD price closed with a profit. Therefore the 150 traders who bet upwards for a total of $15,000 win their original bet in addition to a return on investment of 85%, amounting to a total sum of $12,750. Accordingly, the binary options broker ultimately pays his winning traders the total sum of $27,750 (i.e. $15,000 + $12,750).
> By paying $27,750 to the winning traders, the broker is left with the available amount of $12,250 out of the $40,000 in positions taken by these 400 traders on this binary option.
In our example above, we rely solely on a single financial asset (EUR / USD) over a one-hour period during which the broker would have earned $12,250 in profit. Just imagine for a moment that the broker records ten or twenty similar scenarios in a single day, the broker can potentially earn $100,000 or even $200,000 in profit per day. When we multiply this potential profit over 20 trading days within a month, we can then realize how a binary options broker can achieve several million dollars in profits during this period!
Regulated binary options brokers are brokers that are recognized by the financial authorities and with licenses that prove that their practices comply with the local financial regulations. These binary options brokers earn money legally and have mostly an economic model similar to the one stated above. Regulated binary options brokers are reliable. As a trader who wishes to safety earn money in the financial markets, it is preferable to choose this type of broker instead of unauthorized brokers whose practices have not been validated by the local and international financial regulators; some of whom are susceptible to binary options scams, just like it is the case with most brokers featured in the AMF’s black list of 155 binary options brokers.
We advise traders to choose binary options brokers such as 24Option or TopOption or a regulated broker belonging to the company “Safecap Investments Ltd” which also owns the brokers 24Winner and OptionTime. These binary options brokers have proven themselves over the long term and have licenses from most financial regulators such as the AMF (Autorité des Marchés Financiers – France), the CySEC (Cyprus Securities and Exchange Commission – European Union), the CNMV (Comisión Nacional del Mercado de Valores – Spain), the CONSOB (Commissione Nazionale per le Società e la Borsa – Italy), the BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht – Germany) or the FCA (Financial Conduct Authority – the United Kingdom), hence making them reliable and serious brokers.
Being a reader of our website allows you to follow binary options news and learn how to earn money through this simplified investment product, but also enjoy outstanding advantages.
Our team specializes in negotiating bonuses on deposit with brokers within the binary options trading industry. For example, our team has partnered with the brokers that we discussed in this article, such as 24Option or TopOption. Thus, we were able to exclusively negotiate bonuses on deposit on your behalf. Note that upon opening a 24Option account through our website, you will be entitled to a 100% negotiated bonus on deposit, while under normal circumstances this broker offers up to 20% bonus on deposit to its new traders. Accordingly, opening a new TopOption account will also allow you to enjoy up to a 100% bonus on deposit and thus double your initial investment while this broker does not normally offer any bonus to its new clients.
In addition to the negotiated bonus on deposit, by becoming a trader with one of the partner brokers featured in our website, you automatically qualify for the BonusBinaryOptions.net Guarantee and thus benefit from the special relationships that we enjoy with the brokers and their teams, hence allowing us to help you quickly resolve any problem that you encounter with any of the brokers during your binary options trading experience.