Binary Options

[SWG123]

As a "valued customer" I'm currently being offered the opportunity by some brokers to trade binary options. In one case my account was automatically "upgraded". Yippee!

Now, call me suspicious, but is this just a new and easier way to lose money - or does binary trading actually have merit for savvy traders?

Anyone with experience, please comment.

[cuzgeorge]

Yes Please. Also starting to hear a lot about this and still dont get it!!
I would also like to know more about this from someone who understands this better. It all sounds so looooovely from the other side, but whats the real story people.?
thanks
Cuz

[garyfritz]

If the market perceives the odds to be 50/50 on (whatever the option is about), then you can buy the option for $5. If the option's event happens, you can sell it for $10 at expiration; if it doesn't happen the option expires worthless. If the market thinks the event is more likely than 50/50, it will cost you more than $5; if the market thinks it's less likely you'll pay less than $5.

So e.g. let's say you buy an option for $5. That means your R:R is 1:1. If the event happens, you make $5, if it doesn't you lose $5. The market thinks it's a coin-flip so that's the odds you get.

If the market has bid the option up to $7, the risk:reward has changed to 7:3. You can only make $3 but you can lose $7.

If "the market" accurately predicts the event, then the price of the binary option will accurately reflect the odds, and over the long haul you'll break even. Or worse, given trading costs &etc.

The fundamental question is whether you're smarter than the market. If you have some way of determining the odds for this particular event, better than the market as a whole, then you can change your odds. If you're able to determine there's a 60% chance of the event happening, and the option is $5, you've got an edge. 60% of the time you'll make $5, 40% of the time you'll lose $5, for a net expectancy of $1 per trade.

But if you don't have a method for figuring the odds better than everybody else in the market, you're just rolling the dice. You should go find a game where you have an edge.

[SteveHopwood]

As a "valued customer" I'm currently being offered the opportunity by some criminals to trade binary options. In one case my account was automatically "upgraded". Yippee!

Now, call me suspicious,

Hi, Mr Suspicious.

How about, Hi Mr Justifiably Suspicious?

Or, Hi Mr Paranoid With Damn Good Reasons For Being So.

The moment any crim starts describing me as, "A valued customer/client" I know it is time to pull the plug.

[skoda2008]

With binary options you are trading directly against your broker, not on any kind of market. Clearly they would not offer this product expecting to pay out more than they make. When I looked at the offering from Vantage FX I noticed that the probability of any of the options ending in the money was so remote that I couldn't find anything I'd be willing to put money on.

I personally believe Vantage has lost any credibility they may have had by offering this product, they have blatantly turned into a bookmaker. My advice would be to stay a long long way away.

Unless you are extremely lucky, the only way to make consistent profits from Binary options is to become a "b roker", or perhaps a better term would be TAB, betting agency, casino etc.

[cuzgeorge]

Gary, Skoda,
thank you.
I get the picture Loud-and-clear, i hope other memebers read this too.
cuz

[SWG123]

With binary options you are trading directly against your criminal, not on any kind of market. Clearly they would not offer this product expecting to pay out more than they make. When I looked at the offering from Vantage FX I noticed that the probability of any of the options ending in the money was so remote that I couldn't find anything I'd be willing to put money on.

I personally believe Vantage has lost any credibility they may have had by offering this product, they have blatantly turned into a bookmaker. My advice would be to stay a long long way away.

Well that eloquently summarises what I suspected - thanks skoda2008 and others.

I understand the mechanics of how BOs are supposed to work - pretty straightforward really - and it seems we all have the same reservations .... I mean, betting against your bookie when the bookie makes the market - what could possibly go wrong?

However, what I was trying to elicit with my original post was, has anyone actually tried BO trading for real, if so, what was your experience, or is it too new still?

[skoda2008]

I've traded stock, index and more recently forex options, both on the open market and (with forex) the over the counter interbank variety. The most success I had was writing currency options. A little bit too successful as it turns out, because the only broker I could find that had reasonable spreads / margin requirements started hampering my trades (manual quotes or off quotes all together) forcing me to close my account with them.

If binary options were traded on an open market and allowed you to become the bookie, by allowing you to write them, then I'd be all over them like a rash.

Anyway, like you said, no I haven't actually traded them, for the reasons I mentioned, but there are a couple of threads on FF and trade2win about people claiming to be successful with binaries. Again, the one on trade2win starts talking about the broker starting to play games when she consistently kept winning.

EDIT: It looks like there are some exchange traded ones, CBOE & AMEX, I wonder if there is much liquidity though - there certainly wasn't with currency options on CBOE.

[AnotherBrian]

In the "olden days" they called this a bucket shop didn't they? Remember the Jesse Livermore book?
I tried them recently and the odds are crappy. The time between open and expire aren't long enough, sometimes hours, some even offer 60 seconds. One even has options you can only buy on the weekend with a 300% payout and up to 1000%, and guess what, the target is far off no wonder the odds are so high. They are good if you have a few bucks in your pocket and can't be bothered to go to the casino to place a bet.
There was a site a found with a true demo where you didn't have to "sign up" first, you could do it name-less. Can't recall the site though. If your interested, that's the way to try it, it's more like a game than a trade.

If so many are asking for your name and email before they let you demo, what does that tell you? email bombardment and phone calls probably follow to get you to try it out for real. Stay away, but try the name-less demo for kicks.

[falsedave]

Probably just raising this thread from the dead but started looking at binary options. To anyone intrested I wouldnt bother. You would have to be correct 55% of the time to just break even. Thats if the broker is not playing games. So odds of losing > 55%. If you took your money to the casino and played blackjack you have only have 51% chance of losing. Even then the odds can be slanted in your favour if you know what you are doing.

Seems like you are better off with a good broker trading vanilla options if that the way you want to go. But thats expensive to start out.

http://www.forbes.com/sites/investor/20 ... y-options/