A binary options bonus is a type of welcome bonus that a broker gives you for adding funds to a new account.
Depending on the broker you choose, the welcome bonus can vary from a deposit match, extra trading funds, or prizes. Often, it’s a combination of these. Some brokers will also throw in educational material like tutorials.
As with anything “free,” terms and conditions do apply, so make sure you read the fine print before depositing any of your hard-earned money into a brokerage account for binary options trading.
Bigger isn’t always better, so this brief overview will show you what to look out for before you accept a binary options bonus.
Table of Contents
- 1 The Best Binary Option Bonuses of 2020
- 2 Types of Binary Option Bonuses
- 3 How a Binary Option Bonus Can Help You
- 4 Terms and Conditions to be Aware Of
- 5 Drawbacks of Binary Trading Bonuses
- 6 Why Do Brokers Offer Binary Option Bonuses?
- 7 The Bottom Line
The Best Binary Option Bonuses of 2020
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If you're looking for a binary broker that caters to customers around the world, including USA and Europe, then Pocket Option is one of the best options available.
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BinaryCent trading environment is friendly and secure for all traders. This broker comes highly recommended for all types of traders.
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This platform is best suited for beginners that are looking for a simple interface that is easy to understand.
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Types of Binary Option Bonuses
As you know, binary options bonuses can come in a variety of rewards. We’ll cover the most common:
Also called a deposit match bonus, this type of welcome bonus gives you a percentage of your first deposit as additional funds to trade.
For example, if you fund your account with $100, you may be eligible for a 50% bonus or $50. Some binary options brokers offer 100% deposit bonuses, which would double the size of your initial investment from $100 to $200.
No Deposit Bonus
Alternatively, if you’re just getting started with your first binary trading broker or you’re short on funds, a no-deposit bonus could be the way to go. In this example, you get free money in your account just for opening it.
But remember, there’s no such thing as free money. These deposit bonuses often come with restrictions that don’t allow you to withdraw the money until you do actually fund the account. Or, the terms could require you to do a high volume of trades in a short time, increasing your chances of losing your deposit, especially if you’re a beginner in the field of binary options trading.
One of the most attractive deposit bonuses for new traders is a risk-free trade. In this scenario, you can enter into a trade, and if you sustain any losses, zero funds will be taken out of your account.
On the other hand, if you profit from the free trading, you get to keep the money. Often, a binary options broker will give you anywhere from one to five risk-free trades.
Again, read the bonus terms and conditions associated with risk-free trades. Most commonly, you have to enter into a high number of trades with your profits before you can make a withdrawal.
How a Binary Option Bonus Can Help You
As long as you accept any deposit bonuses with your eyes wide open, you can benefit from a binary options bonus. Remember, it’s still technically free money or an exclusive benefit you get for opening an account with a broker.
It is also worth shopping around because generous bonuses with few strings attached can signal that you’re dealing with a superior broker.
Another thing to consider is that a modest bonus with few or no terms can be the best bet. By evaluating the bonus options and reading the fine print, you can find a transparent and honest broker in an industry that’s known for questionable tactics.
Terms and Conditions to be Aware Of
The fine print of the terms and conditions can be enough to make you lose faith in humanity if you’re not careful.
While most of these brokers are above board, there are a few brokerages that are borderline criminal.
Without naming names (don’t worry, we would never recommend a binary options broker that would do anything we’re about to describe), we’ll tell you the most common terms to look out for that could land you in a trap and separate you from your money.
Don’t be surprised if a broker’s terms dictate that you can’t withdraw your money until you’ve met their turnover requirements.
Turnover is expressed as the number of times your deposit or bonus must be traded before it’s eligible for withdrawal. The range is usually between 10 and 40, with an average of about 20 to 25.
For example, if your bonus amount was $100, and the turnover was 20, you would have to execute $2,000 in trades before redeeming your bonus for cash.
We can’t stress enough the importance of reading the fine print. Specifically, be on the lookout for “locked-in deposits.” What this means is that you can’t even withdraw your initial deposit, let alone the bonus, until you meet the minimum turnover requirement.
A final condition to look for is how your bonuses and profits are paid. In an ideal scenario, the bonus is kept separate from your initial deposit funds because that helps you keep track of which money is yours and which is the broker’s.
And, once you’ve made some profits with either your bonus cash or a risk-free trade, are those earnings subject to their own conditions? If so, then you might never see that bonus money, so be on the lookout for how these rules are worded.
Drawbacks of Binary Trading Bonuses
Once you understand how restrictive these deposit bonuses can be, you might want to avoid them altogether.
In addition to being familiar with the terms that can trap you (and your money), it’s also crucial that you’re aware of the actual drawbacks of a deposit bonus and how they can affect you.
It’s not unusual for the binary option bonus to be inaccessible until you’ve executed a minimum amount of trading dollars. This number is typically expressed as your original deposit plus the binary option bonus.
For example, if you funded your account with a $1,000 deposit and received a $500 bonus, your total balance would be $1,500. In this trade minimum scenario, you might be required to do 20x in trading volume before you can get the deposit bonus. This would equate to $30,000.
If you’re not a high-volume trader, it could take a while to get to this point.
To add insult to injury, the broker might require you to execute these trades within a specific timeframe. It could be 30, 60, or 90 days. There are a couple of reasons why this drawback is particularly painful:
- If you’re new to binary options trading, it’s not a good idea to make a bunch of trades all at once. It takes time to understand the patterns and develop a skill and a sense for this type of trading. By forcing a beginner to do a large number of trades, it’s like the broker is counting on the client to lose it all and avoid paying out the deposit bonus.
- Investors often fall into the trap of over-trading. Experienced investors make sure they are selective in their trading activity. By forcing a minimum trading volume in a compressed time period, it can result in traders being forced to make poor trades to get their volume up to bonus-redeeming numbers.
While it’s understandable for a broker to put restrictions on when and how you can withdraw a deposit bonus, it’s not fair for them to also dictate rules about your original deposit. However, some brokers do exactly that.
They force you to meet all the conditions pertaining to their deposit bonus before you can withdraw your original funds.
Why Do Brokers Offer Binary Option Bonuses?
The primary reason brokers offer a binary option bonus is to attract new traders and motivate them to open an account. There’s a significant amount of competition, and the initial appeal of a generous deposit bonus can help a broker stand out from the competition.
CySEC Regulated Brokers and Bonuses
Short for Cyprus Securities and Exchange Commission, CySEC regulates many of the binary options brokers across Europe. Their mission is to oversee the financial markets in Cyprus and protect individual investors from shady practices.
In light of many of the restrictive and “bait and switch” style binary option bonuses, CySEC elected to force the discontinuation of them among the brokers that they are responsible for regulating. Keep in mind that other brokers can and still do offer deposit bonuses, so you still have a choice if you want to pursue an account that offers them.
CySEC also took additional measures to protect investors’ funds, including requiring brokers to put the money in protected accounts separate from their business to prevent comingling, theft, and fraud.
The Bottom Line
Now that you know how binary options bonuses work, you might be wondering if you should avoid them altogether.
Earlier, we hinted that when it comes to these bonuses, bigger isn’t always better. Sometimes a simple $20 bonus for getting started comes with few (or no) terms. If that’s the case, why not take the free money and start trading.
You also have the option of avoiding a bonus altogether by getting on the phone with the broker before you open the account. You can try negotiating a better deal or offer to forgo an initial modest and restrictive bonus. Instead, ask for something more generous without strict terms in exchange for keeping a significant amount of money active for three to six months.
That’s just one example of potential negotiating tactics for a deposit bonus. Feel free to use your imagination to figure out a way to sweeten the deal of opening a binary options trading account without feeling like you’re selling the soul of your firstborn.
Robert Wolfe is the founder and chief editor of Impact Investing Collaborative. Robert is an expert trader with over 10 years of experience trading binary options, Forex, and CFDs. He prides himself in providing accurate and in-depth reviews in order to help others find a trading platform that fits their needs. When Robert isn’t actively trading or managing Impact Investing Collaborative, he enjoys spending time with his 3 kids, playing golf, and spending time outdoors.