Binary Bets

Binary Bets

Sunday, 29th December 2019 at 1pm - 11:30am Monday, 13th January 2020

Location: London

This event is in the past.

The number of markets that you can make binary bets on is limited compared to that of other financial spread betting markets but in recent years that number has been increasing. The most popular market for binary bets is probably indices.

Binary bets are very short term usually lasting a day at most. There are usually only two outcomes so you are either right or you are wrong. It doesn’t matter how right you are or how wrong you are, all that counts is the overall outcome.

I will explain by the way of example… the FTSE100 is trading up so far in the session and you are confident that it will be up at the end of the day. You have no idea how much it will be up, you don’t care as long as it finishes up. In fact, it can fall from the point where it is now as long but as long as it finishes in positive territory at the end of the day you will win the bet.

So in the above example you want to place a binary bet on the FTSE100 finishing up. You go to your financial spread betting account to get a quote for that bet. You are quoted 60 – 55. This means that if you place a bet of £1 and you win (i.e. FTSE finishes positive), then the amount that you win will be £40 (= (100 – 60) * £1).

If the FTSE doesn’t finish up then you lose your bet and you lose £60 (= (0 – 60) * £1).

The reason that I think the binary bet is becoming more popular as financial spread betting system is because of its transparency. You know what you will win or lose at the start of the bet.

They are great short term trading instruments and as you can imagine, the prices move throughout the day so you can even trade out of your bet before the end point.

Example continued…

We might have placed the above bet in the morning of a trading day. As the day goes on, even if the value of the FTSE doesn’t really move, then the price trade is likely to go in our favour as there is less time (and therefore less news likely to emerge) for the situation to change. In this situation you could trade out of the bet before the day’s end at a profit.

The disadvantage of binary bets is that they aren’t currently regulated by the FSA. This may change in the future as more financial spread betting is done this way.

Binary betting can be a little frustrating and conversely a great relief. Imaging putting the above bet on and you were right. Not only were you right, you were very right. The market rallied to a record day. You would still only win your £40.

Looking at it the other way though. Imagine you were wrong, very wrong… the market tanked. You will be grateful to know you still only lost your £60.

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Binary Bets

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