How Binary Options Work

A binary option is a fixed-time contract that pays a predefined amount if the price of an asset finishes above or below a strike at expiry. There are only two possible outcomes — hence binary.

You choose the asset, the direction (Call or Put), the stake and the expiry. The broker quotes a payout percentage (typically 70–98%). If you're right at expiry, your stake plus the payout is credited; if you're wrong, you lose the stake.

Expiries can be as short as 5 seconds on turbo contracts or as long as the end of the trading week. Most retail volume sits between 1 and 15 minutes — short enough for high frequency, long enough to give a trade thesis room to play out.

Because payouts are below 100%, every trade has a negative expected value on a fair coin. To break even on 80% payouts you need to win roughly 55.6% of trades; at 90% payouts the break-even is about 52.6%.

Most brokers earn the difference between the win-rate of their book and the payout offered, similar to a sportsbook holding an over-round. Some also widen the entry spread by a few tenths of a pip at the moment of execution.

A handful of brokers route their largest customers into a separate liquidity pool that hedges externally — these accounts tend to get the cleanest fills and the fewest re-quotes.

High/Low (Call/Put): the standard contract — price finishes above or below entry.

One-Touch: pays out if price touches a level at any point before expiry.

Range / Boundary: pays out if price stays inside (or breaks out of) a band.

Ladder: tiered strikes above and below entry with progressively higher payouts.

Realistic part-time traders with a tested edge aim for 5–15% account growth per month, not the 200% screenshots that fill broker advertising. Anyone promising guaranteed returns is selling you something — usually a signal service or a managed account.