How it works
A binary option pays a fixed percentage of your stake when you are right and takes the whole stake when you are wrong. Because the payout is below 100%, a win earns less than a loss costs.
That is why the most important number is the break-even win rate: the share of trades you must win just to end at zero. Below it, every trade loses money on average, however good individual days feel.
Formulas
- Profit on a win = stake × payout
- Loss on a losing trade = stake
- Break-even win rate = 1 ÷ (1 + payout)
- Expected result per trade = win rate × profit − (1 − win rate) × stake
Example
With a $10 stake and an 85% payout, a win earns $8.50 and a loss costs $10. You need to win 54.1% of trades to break even. At a 50% win rate each trade loses -$0.75 on average, so 100 trades cost about -$75.00.
Frequently asked questions
How is profit calculated in binary options?
Profit on a winning trade is the stake multiplied by the payout percentage. If you stake 10 at an 85% payout, a win pays 8.50 profit plus your 10 back; a loss costs the full 10.
What win rate do I need to make a profit?
More than 1 ÷ (1 + payout). At an 85% payout that is about 54.1%; at 80% it is 55.6%. A 50% win rate always loses money when the payout is below 100%.
Does a higher payout make binary options profitable?
It lowers the break-even win rate but never below 50%. Payouts also change by asset and time of day, so use the payout shown when you open the trade.