Business model Binary Options

When asked how binary options brokers make their money, the unspoken suspicion resonates with that brokers could cheat and most money if the customer loses. If it were so, the broker would actually ever be tempted to its platform to the detriment of customers to manipulate. The fact that there is a great error lies, will be explained below.

Arrow Green How earn money brokers traditionally:
binary-elementsBinary options brokers make like any other broker money on spread between bid and ask price of a security. With binary options, these rates are shown as with all securities, however, ignored by many traders because they are actually very small – often only one cent – and only play a very small role in the calculation of the trader in relation to the actual gains and losses , Some brokers charge extra fees low, but this is for their bottom line not mandatory, if enough transactions take place on its platform. Of course, the issuer of a security also deserves the spread between bid and ask prices, the profit share issuer and broker – in what proportion, unfortunately, is not known. Questions arise after consideration of this procedure still two questions.

First question: Where is my money or where does it come from?

1. What happens if the client wins or loses?
2. How earn issuer and broker to spread loose bills, the other for the same price and sold? Because this variant is also available.

The second question is difficult and more exciting than the first, but can be found for both questions satisfactory answers.

First question: Where is my money or where does it come from?

First of all the comfort:

Your money is not lost when you lose, it now has only one other traders. Sometimes you win, then spoke figuratively another trader given you this money. What role issuer and broker in this process? Now, both deserve the spread and possibly in fees, but if you lose, underline broker and issuer no means your money a. The broker has rather hedged, which means that his computer program has booked at the same moment in which you have purchased a call (on rising prices), a put in exactly the same extent. If your call is sold – whether by gain or loss -, the computer program of the broker automatically triggers on their own put position, profits and losses offset each other for the broker. There remains only the profit from the spread.

Arrow Green And what about the spread loose bills?

This representation, however, is shortened because possibly yes, another trader has already booked a put position that has approximately the size of your call position. Then the broker only has to worry about the difference between the two positions, and that is what takes place in practice. The broker would never put it, that you and all traders lose most. Sometime namely would a trader who wins majority, which would drive the broker into bankruptcy.

If bills other at the same price and are sold, they lose daily and hourly in the per thousand range in value against the underlying. This happens even with all bills, but also little of registered traders, since it is actually difficult to observe. Given would hold a bill for weeks and months and repeatedly Syndicate the course with the underlying. This also makes not a man, because it is simple marginal in relation to the real gains and losses. This very small value loss making but in the mass profits from brokers and issuers.