Why are brokers so profitable with binary options?
The first thing you should understand when working with binary options is that your transactions are over-the-counter, they are not displayed on any market and the counterparty to your transactions is either the broker itself or the brokers' clients. Well, now, actually, let's understand how brokers earn on binary options.
If the broker is large enough and has a large number of clients, the scheme will look as follows: there is client number 1 and client number 2, one of them puts 100$ on the fact that the price, for example, the euro/dollar, will grow, the second, respectively, puts 100$ on the fact that the price of euro/dollar will fall. As a result, one guesses the direction of movement of the currency pair, the second does not. The broker will pay 180$ of profit to the guesser, if the broker's commission, or rather, the premium paid by the broker is 80%, and the second will get nothing, because he did not guess the direction of price movement. It turns out that the broker collected 200$ from two clients, paid 180$ to one, paid nothing to the second, and thus earned 20$ on two deals. As you can see, it turns out to be a very good business. That is why binary options are so profitable for brokers. They are guaranteed to earn money from each bet of their clients.
This pattern of work is relevant for large brokers that have a large number of clients and always have traders who buy or sell binary options. However, if we are talking about the work of some small brokers that do not have so many clients, and especially if this broker also pays more than 100% of the premium from the transaction, then everything is different here. You must clearly understand that in this transaction it is the broker is the counterparty to your operation, and in this case, the broker must either be 100% sure that you will be incorrectly set your positions, or he must frankly play against you to earn. Therefore, when working with binary options, it is extremely important to choose large proven brokers, and if the broker is small, and moreover pays a very high percentage of profit, he is interested in your loss.
