Like every other for-profit business in the world, binary options brokers must constantly bring in new clients in order to keep generating income. Loyal clients are always desired, but it's the regular flow of new money that keeps businesses afloat. In order to attract clients, and stand out from the crowd of dozens of other brokers, there are many little sales tricks that are used. One of those is binary options bonuses, and it can be difficult for new traders to judge whether or not this perk is worthwhile.
Binary Options Bonus: What is it?
Before we can examine the pros and cons of binary options bonuses, we need to define what the term means, and how they work. On the surface, a bonus basically sounds like free money. The broker offers an investor a percentage of their initial investment as a bonus. So for example, if an investor deposits an initial $500, a 40% bonus would add an extra $200 to the investor's account—giving them a total of $700 in initial investments.
Sounds like a great deal, right? But as with most sales gimmicks, there is far more to a binary options bonus than meets the eye. Considering this bonus “free money” is a bad idea. Instead, it's better to think of the bonus as “leverage”. You now control an extra $200 for trading with (from the example above), meaning that you can win (or lose!) more money than you could have if you had been trading with only your initial investment.
Binary options bonuses generally come with strings attached, as well. Investors may only claim bonus money (as in, consider it earnings and move it to a bank account) when the specific broker bonus amount has been rolled over many times. Contracts vary by the broker, but it's not uncommon to see rollover clauses that require the bonus amount be rolled over 40 times before the initial amount can be claimed.
So that's what a binary options bonus is, and how it works. In order to decide if you're comfortable with accepting a bonus, let's examine the pros and cons of bonuses.
The Case for Binary Options Bonuses
Those who choose to utilize these binary options bonuses from a broker are traders who see the value in controlling more money, or having more leverage for trading. When you have more initial investment, you are able to potentially win more money, more quickly. That's an attractive option for traders who are comfortable with the risks.
Additionally, a bonus can help the initial bankroll last longer, meaning that new traders will have a little more time to get used to trading before they run out of leverage. For those who are just dipping their toes into binary options trading, this can be a good way to get an extended practice run before investing a larger amount.
The Case Against Binary Options Bonuses
The converse of being able to win more, and win faster is that you'll also be able to lose more, and lose faster. If you don't play it smart with higher stakes options, your trading could be cut short when you run out of initial investment faster than you would have with the lower stakes options that you typically would have gone with if you had less leverage to start with.
Binary options bonuses can be a good thing for investors who are willing to be patient and smart about their trading. If you aren't comfortable with the risk, you can always refuse the bonus when working with a broker.
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