Statistics on binary options earnings

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Statistics on binary options earnings

You may have heard, that binary options brokers based and regulated in Japan must publish anonymous statistics of all trading accounts. These statistics can be viewed further here: FinanceMagnates.com. I will summarize it below.

On average, out of 100 binary options trading accounts, 26 profit, which is not a bad number. It means that every fourth trader is profitable. It’s not a big number, no, but it’s definitely a higher number than I would have guessed. So, you might believe now that binary options are not a scam and every 4th trader actualy makes money!

And although it might be sad, most of the losing traders support us – traders who earn money. Without them this business would not be possible.

All you need to do in order to be profitable is to learn, learn, learn . That is why I would like to remind you that on our site Binary Options, you can find lots of educational materials, such as free books or articles that I wrote myself from my own binary options trading experience. Perhaps the most important articles can be found here: Technical Analysis Series.

Another thing that we can not ignore under any circumstances is the psychology of a trader and his money management. For example, I have written some articles about the money management of binary options. and in the future, I definitely intend to pay more attention to this topic and to write further articles, because it really is one of the most important factors.

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Lesson: Statistical Probabilities Of In-The-Money Binary Options

This article was written by Tommy O’Brien.

With earnings season still in full swing there are many news events moving the markets every trading day. Along with earnings, we also have the usual economic announcements like the non-farm payroll Friday morning at 8:30 am ET. The street is expecting 200K jobs will be added.

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There are many ways to trade news announcements, one of which is the binary option market. When trading binary options you have the benefit of defined risk with the ability to diversify your trading portfolio.

The risk vs. reward of any trade is an important part of being profitable. When trading binary options your risk is always defined, and so is your maximum profit. Binary options are worth $100 if they expire in-the-money and worth $0 if they do not.

Here is a chart of the Wall Street 30 as of Thursday at 4 pm ET, Which is based on the CBOT E-mini Dow Futures. Along the right axis are some of the weekly binary options available that expire on Friday at 4:15 pm ET, with about 24 hours and 15 minutes remaining.

One trade possibility if you had a flat to bullish market bias would be to buy an in-the-money binary option, which would be a higher probability trade as the underlying market is above the strike. One binary option you could buy is the deep in-the-money >17,375 for $90. Your defined risk would be the $90 per contract that you initially pay, and your maximum profit would be $10 if the binary option expires in-the-money for $100 of total value. You would be risking $9 for every $1 of potential profit.

While the math seems easy on this one single trade, it’s important to be aware of the probabilities of multiple losses and wins. Assuming you have a 90% chance of success on this trade, since that’s what the market is pricing it at, then you will be profitable making this trade 9 out of 10 times.

If you make 7 trades every day with this same 90% chance of success then you will actually be less than a 50% favorite to be successful in all of them consecutively (0.90 x 0.90 x 0.90 x 0.90 x 0.90 x 0.90 x 0.90 = 47.83%). When you risk $90 to only make $10 it can hurt badly when that loss shows its ugly face. You should always be calculating the probabilities of differing scenarios playing out, especially when you have money at risk. The reason for having to risk $9 in this trade to make every $1 in potential profit is because you have about 194 Dow 30 points of premium that the index can move against you while still in-the-money.

If you wanted to risk slightly less to shift the potential reward in your favor then you could choose to buy the binary > 17,475 strike for $74. Your risk for this contract would be capped at the $74 you initially pay and your maximum profit would be $26 if it expired in-the-money. In this potential trade you would be risking about $2.85 for every potential $1 in profit with about 94 Dow points of premium in your favor. With a theoretical 74% chance of success your probability has dropped yet so has your maximum risk.

If you made 3 trades each day with each having a 74% chance of success then you would have a 40.52% chance of 3 trades being consecutively profitable (0.74 x 0.74 x 0.74 = 40.52%). Even making 2 consecutive successful trades, with each one having a 74% chance of success, is only barely a favorite at 54.76% (0.74 x 0.74 = 54.76%). If you felt the opposite on this trade and thought the market would be negative to flat tomorrow then you could also sell a binary option above the current market for a similar inverse strategy. If you sold the >17,775 binary option for $9 then your maximum profit would be capped at the initial sale price while your maximum risk would be $91 ($100 expiration value – $9 initial sale price). Even at a 91% chance of success you should prepare for the inevitable loss and always be aware of the probabilities of your trades.

Making higher probability binary option trades can be something to consider possibly the next time you’re scanning the market for profitable set-ups. When trading anything with a defined risk vs. reward you always want to be calculating your chances of success and the probabilities of future events occurring. Understanding the math and probability of your possibly investment will help you become a more profitable trader.

Note: Exchange fees excluded for calculations.

Futures, options and swaps trading involve risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results.

Trading Guide: Trading Binary Options on Earnings Announcements

Brands such as Facebook, Google and Alibaba have become quite popular, not only in the financial world, but with the public in general. Many of them have changed our lives in a visible way, some even have fundamentally influenced our behavior and habits. Binary options brokers have been trying to attract traders by offering options on more and more stocks to their asset lists, as these brands are easily recognizable, even by novice traders.

Attempting to examine trading on earnings announcements from the perspective of binary options requires some basic knowledge of these events. Earnings usually come out before or after market hours, so traders have already moved the price in pre or after-markets (this can be checked through various financial news websites, readily available in the Web). This is the point where a prediction has to be made – will the price continue from its new starting point, or will it reverse?

This is left to the trader’s discretion for the respective stock they have chosen. They can rely on statistics of how many times the price has continued in the initial direction, or some other indication, but what has to always be taken into consideration is any changes that brokers make to payouts in these volatile times. There might be lowered payouts for a specific period of time and some stocks might not be available at all. To be prepared, it is advised to contact your binary options broker and confirm any such changes in advance.

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Another important point in trading stocks with binary options on the days their revenues and sales numbers come out, is that stocks do tend to move with higher percentages than when there are important announcements for currencies. It’s not uncommon to see a 10% drop or gain after strong or weak numbers from companies like Facebook, Twitter and Amazon, for example.

Herein lies one of the opportunities and dangers of trading stocks around announcements – pullbacks are quite often found and they can take different amounts of time. The usual style of trading is to follow a confirmed trend. As the news swings sentiment into one direction, there will be an influx of traders who want to get in on the action, pushing the price further than usual.

But some prefer to wait for the pullbacks and trade on them when reaching the expiry time. Whichever you choose, it’s vital that you don’t swing between these styles while you’re trading, as that will quickly eat up your account. Stick to only one trading style!

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  • BINOMO
    BINOMO

    2nd place in the ranking!

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