Break Even Point and Required Win Rate

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 $10 per option with a 70% payout. 70% of $10 is $7 profit.

10 ÷ (10+7) X 100

Do the brackets. 10 + 7 = 17 therefore

10 ÷ 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 24Option. In this example we will invest $500 per option.

500 ÷ (500+425) X 100

Do the brackets. 500 + 425 = 925 therfore

500 ÷ 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 $1000 trading an option that has 80% payout.

  • You decide to invest $100 per option and you have a 60% win rate. You want to know how many option you have to trade to win $1000.

    If you finish in the money you win $80, if you finish out of the money you lose $100. For every 100 options you trade you win 60 X $80 = $4800 and lose 40 x $100 = $4000. So you are winning $800 per 100 trades = $8 per trade. You want to win $1000. $1000 ÷ $8 = 125 therefore you need to trade 125 options to win $1000.

  • You decide to trade 500 options for $50 each. You want to know what win rate you need to make $1000.

    A winning option wins you $40 and a losing option losses you $50. You need to win $2 per option.

    289 winning options X $40 = $11560

    211 loosing trades X -$50 = -$10550

    $11560 – $10550 = $1010

    289 ÷ 500 X 100 = 57.8% win rate. Therefore you need a win rate of 57.8% to win $1000.

  • 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 $1000.

    You need to win $3.33 per trade. With a 63% win rate you know you will win 189 trades and lose 111. Making trades of $25 will win $20 if you finish in the money and lose $25 if you finish out of the money. you win 189 X $20 = $3780 and you lose 111 X -$25 = 2775.

    $3780 – $2775 = $1005. Therefore you need invest $25 per option to win $1000.

    Be champions!

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