Binary options lose money by design
At an 80% payout, expectancy is −10% per trade and you would need a 55.6% win rate just to break even. What ESMA, the FCA and the CNMV ruled, and why the 74-89% everyone quotes is not about binaries.
A binary option is a bet on whether a price will sit above or below a level a few minutes from now. Get it right and you collect a fixed percentage of what you staked. Get it wrong and you lose the stake in full.
That fixed percentage is the whole article. When the payout for being right is worth less than the loss for being wrong, and the proposition is close to even, expectancy is negative before you open the first position.
You do not have to believe anything or distrust anyone. It is arithmetic, and it fits on a napkin.
The calculation that settles it
Take an advertised payout of 80% and an even proposition: half the time you are right, half the time you are wrong.
- When you win, you make 0.80 for every 1 risked.
- When you lose, you lose 1.
- Expectancy = (0.50 × 0.80) − (0.50 × 1) = 0.40 − 0.50 = −0.10
You lose 10% of what you risk on every trade, on average, while being right exactly half the time. None of that depends on the pair, the chart or the hour of the day.
| Advertised payout | Expectancy per trade | Win rate needed to break even |
|---|---|---|
| 70% | −15.0% | 58.8% |
| 75% | −12.5% | 57.1% |
| 80% | −10.0% | 55.6% |
| 85% | −7.5% | 54.1% |
| 90% | −5.0% | 52.6% |
The right-hand column deserves a second look. At an 80% payout, being right more than half the time is not enough: you need to be right 55.6% of the time, indefinitely, just to break even. Anything below that number is an account draining at a steady rate.
Why the payout never reaches 100%
Because that gap is the business. The difference between what you collect for being right and what you lose for being wrong is the margin of whoever offered you the trade, in the same way the zero is the margin on a roulette wheel.
And one detail changes the nature of the product: in a classic platform binary option, your counterparty is the platform itself. There is no market where your bet meets another participant's. You win when it loses, and it loses when you win.
That does not make it fraud by itself, but it does explain where the payout sits: it is set by the party on the other side.
What the regulators said
Binary options are not a contested product with an open debate around it. They are banned for retail clients across the European Union and the United Kingdom, and the ban was imposed at the highest level.
| Regulator | Measure | From |
|---|---|---|
| ESMA (European Union) | Prohibition on marketing, distribution and sale to retail investors | Agreed 23 March 2018 |
| FCA (United Kingdom) | Permanent ban, extended to securitised binary options | 2 April 2019 |
| CNMV (Spain) | Sale to retail clients prohibited, indefinitely | 2 July 2019 |
The European Securities and Markets Authority, ESMA, wrote when justifying the measure that national supervisors' analyses "also found consistent losses on retail clients' accounts" in binary options.
It is worth naming what ESMA did not publish: a percentage of losing accounts for binary options. The widely quoted 74-89% figure sits in that same document, but it refers to contracts for difference, not to binaries. Attributing it to binary options is a mistake we have seen repeated everywhere.
The UK's Financial Conduct Authority went further in its official statement on the permanent ban, where it estimated a saving to consumers of up to £17m a year and wrote one sentence worth reading slowly:
"Any firm offering binary options services to retail consumers is likely to be a scam."
That judgement is the FCA's, not ours. We are reproducing it and pointing at the document.
In Spain, the Comisión Nacional del Mercado de Valores carried the European decision forward through its resolution of 27 June 2019, published in the official state gazette, and the measures stay in force until the CNMV sees market conditions change enough to lift them.
If they are banned, why do they keep showing up?
Because the ban reaches whoever may legally offer them in those jurisdictions, not whoever advertises from outside. A platform still offering them to a European or British resident is, by definition, operating outside that prohibition.
That is the most useful filter available to you: if someone offers you binary options and you live where they are banned, the conversation is already over. There is nothing about the platform left to analyse. A regulated broker cannot sell them to you.
How this differs from forex
The distinction matters, and it is not the one usually drawn.
The currency market is a zero-sum game before costs: one participant's gain is another's loss. Net of spread and commission it turns slightly negative, and that is where the real difficulty of making money consistently comes from.
A binary option at an 80% payout starts at −10% per trade. That is not a hard market: it is a product whose structure guarantees the aggregate outcome. The distance between "difficult" and "mathematically losing" is the distance between a craft and a slot machine.
If you want to see what a negative expectancy does to an account when applied many times over, it is worked through in the piece on risk of ruin. And if you care about the machinery used to measure any of this, expectancy, Sharpe and Sortino is the right framework.
What this article does not tell you
It does not tell you there is a strategy, an indicator or a money-management rule that fixes this. There is none, and that is precisely the conclusion: when expectancy is negative by structure, no technique layered on top turns it positive.
It also does not weigh whether any particular platform is honest, or how to recover money already lost. And it does not cover binary options traded on regulated US exchanges, which are a different product under a different legal framework.
What it does give you is the only number you need before looking at any other: how often you would have to be right, just to not lose.
If you are weighing where to start properly, the honest starting point is asking whether forex is profitable or a scam and reading the full answer, with its numbers.
