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Binary Options - Returns
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Binary Options  -  Returns

Return is the preferred term for an investment’s payoff. If you watch CNBC television enough or speak to a few investment banker types, you will come to believe that returns are the only things that matter in the universe. ‘‘Return on this’’ and ‘‘return on that’’ and ‘‘year-to-date returns’’ are all that the stock and bond market mavens focus on.

Investment people generally speak about a particular return over time, say, a 9 percent return over a year. To show a comparison of returns, odds, and payoffs let’s look at the total return after many events take place, such as after tossing 100 coins. For this example each coin we toss will have a winning payoff of $1 and a losing payoff of $1 (each toss is a $1 bet). The odds and payoffs stay the same throughout the 100 tosses, but there is a huge swing in the returns from toss to toss. Note that after the first coin toss the return is either 100 or 100 percent of the $1 bet. But after a series of 100 bets where you win 54 and lose 46, the net return would be only 8 percent. To convert the resulting return to a decimal or percent merely divide by the money at risk during the series of events.

As another example, if you put up $100 and get back $109, you would have a $9 profit or net return. This is pretty clear. But some economics books might say your gross return was $109, or they might say a return of 1.09 times capital (meaning 1.09 times your original investment). Or they could call it a net return of .09 which is the same as 9 percent. Sometimes they neglect to say net or gross. The concepts of gross return and net return get confused and misused often, but when it’s your money you’ll know the difference! There’s an old joke about how a fellow made a quick 50 percent return on his money: ‘‘My commodities broker was on a real hot streak trading cocoa and sugar futures. I got back 50 percent in under a week—the 50 percent he hadn’t lost yet!’’ Clearly that’s not the same type of return you are hoping for. It should clearly say –50 percent when you lose half. There are plenty of hucksters who publish false advertisements about their great investment returns to get a shot at managing your money. The sad truth is that many, many published investment returns aren’t even remotely close to reality. But you cannot depend on the SEC to protect you because it doesn’t even have enough workers to keep its lists of flagrant abusers up to date, let alone stop them from lying.

It’s up to you to learn the rules of the industry and all the possible meanings and usages of returns before you send a penny.

Binary options will definitely help you. In order to understand binary options better, read this article once more.


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