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How do Binary Options work?

Here is the US dollar and here is the euro. The euro to dollar exchange rate means how many dollars one euro costs and this race is constantly changing.

IQ option acts as a broker, selling options to traders who has multi positive interest. The average rate of return of US/euro path is 85% if you’re trading on the IQ option platform.

This is Tom. He believes that the price of the asset will go down, so he invests, let’s say, 100 dollars on the conjecture that it will go down.

And this is Jim. He believes that the price of the asset will go up, so he invests 100 dollars in it as well, fee rising that it will go up. The price of the asset went up. Jim was right. He gets the promised 85% return, which is abducted from Tom’s investment.

The remaining percentage is the broker’s commission. In this example the broker takes a commission of 7,5% ascending turnover for any possible outcome. Each trader has invested 100 dollars so the turnover amount to 200 dollars. And 7,5% of this amount is 15 dollars. But only IQ option platform thousands of traders are trading at any given time.

Jim is part of the group of traders that predicted the asset price would go up. Let’s call them the bulls and all together they invested 10000 dollars on that prediction.

At the same time Tom’s group of traders, let’s call them the bears, invested 8000 dollars in the prediction that the same asset price would go down. This is discrepancy of 2000 dollars. This is where a market maker comes into the picture.

The market maker is the institution with down capital and it’s always ready to take risk when the discrepancy of investments appears. A market maker gets its profit in the following market situation. If the bears’ forecost comes to 00:01:51 and the price of the asset goes down, the market maker will take this difference of 2000 dollars as the commission for covering potential risks. IQ option as a broker takes a commission of 7,5% in turnover. And a bear take a profit of 85% which was covered by investments from the bulls. Risks for a market maker will come up when a market situation is reversed.

If the bulls win and the price of the asset goes up, the market maker will compensate from this discrepancy from its funds to provide the bulls the profit they earned, which wasn’t completely covered with investments from the bears. If the bears win, the market maker takes this difference as a profit and as a fund for covering potential risks.

IQ option as a broker works with several market makers to ensure uninterrupted operation of the trading platform. Our company guarantees that traders will get their profit for any successful transaction.

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