When you settle on a particular type of binary option and asset to trade on you should work out what % of your trades you need to win to break even, we call this required win rate. This will give you a benchmark to track your performance against and tell you whether long term profits are possible.
The required win rate all comes down to the payout % on the option you have decided to trade in. The calculation is
Stake ÷ (Stake + profit) X 100 = required win % to break even.
For example let’s say you want to stake ฿0.1 per option with a 70% payout. 70% of ฿0.1 is ฿0.07 profit.
0.1 ÷ (0.1 + 0.07) X 100
Do the brackets. 0.1 + 0.07 = 0.17 therefore
0.1 ÷ 0.17 X 100 = 58.28%
So for 70% payout options you need to win 58.28% of your trades to break even. Let’s see how much this changes if we get a nice high payout % of 85% like we do on Beast Options. In this example we will invest ฿0.5 per option.
0.5 ÷ (0.5 + 0.425) X 100
Do the brackets. 0.5 + 0.425 = 0.925 therefore
0.5 ÷ 0.925 X 100 = 54.05%
With the higher payout rate we only need to win 54.05% of our options to break even.
What ABC do I Need to Win XYZ
To work out how many options you would need to trade, what win rate or how much to invest per option you need to profit a certain amount of money you need to know any 2 of these 3 things to calculate the other.
- Number of trades
- Win rate
- How much to investment per option
In all examples let’s say you want to make ฿1 trading an option that has 80% payout.
- You decide to invest ฿0.1 per option and you have a 60% win rate. You want to know how many option you have to trade to win ฿0.1.If you finish in the money you win ฿0.08, if you finish out of the money you lose ฿0.1. For every 100 options you trade you win 60 X ฿0.08 = ฿4.8 and lose 40 x ฿0.1 = ฿4. So you are winning ฿0.8 per 100 trades = ฿0.008 per trade. You want to win ฿1. ฿1 ÷ ฿0.008 = 125 therefore you need to trade 125 options to win ฿1.
- You decide to trade 500 options for ฿0.05 each. You want to know what win rate you need to make ฿1.A winning option wins you ฿0.04 and a losing option losses you ฿0.5. You need to win ฿0.002 per option.289 winning options X ฿0.04 = ฿11.56211 loosing trades X -฿0.05 = -฿10.55฿11.56 – ฿10.55 = ฿1.01289 ÷ 500 X 100 = 57.8% win rate. Therefore you need a win rate of 57.8% to win ฿1.
- You decide to trade 300 options and you know you have a 63% win rate. You want to know how much you have to invest per option to win ฿1.You need to win ฿0.00333 per trade. With a 63% win rate you know you will win 189 trades and lose 111. Making trades of ฿0.025 will win ฿0.02 if you finish in the money and lose ฿0.025 if you finish out of the money. You win 189 X ฿0.02 = ฿3.78 and you lose 111 X -฿0.025 = ฿2.775.฿3.78 – ฿2.775 = ฿1.005. Therefore you need invest ฿0.025 per option to win ฿1.
Be champions!
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