Binary Betting

Binary betting is similar to fixed odds which offer benefits. In binary betting traders know the potential profits and losses. Binary means two and a bet is a proposition between two possibilities.

Traders will either agree the outcome will occur or not occur. An agreement would result in the trader buying the binary bet. Selling the bet occurs when the trader disagrees with the outcome.

Binary bets are available to traders for a variety of time frames. Bets are found for weekly, daily, hourly, or even minute time frames. All binary bets will either end at 0 or 100 and nothing else.

The 20 minute and 5 minute bets can be very volatile in the market. Traders should be careful betting on these unless one is experienced.

Types of Binary Bets

There are several different types of binary bets available. A target bet is a popular bet stating the market price will close. This bet says the bet will close between two given numbers.

If the outcome occurs, the binary bet will settle or end at 100. A ladder bet is a bet an underlying market will end above a price. This type of bet will settle at 100 if the event does in fact occur.

Another type of binary bet available on markets is the one touch bet. This means the market price will touch a given resistance level. This touch, or pass, must occur before the expiry date or future.

Betting firms developed binary betting to speculate on the markets. Most spread betting firms offer binary bets on major markets. Other firms have limited number of contracts as each is different.

The firm’s commissions for binary bets are factored into the bet. All profits from binary bets are exempt from Capital Gains Tax. This is similar to other aspects of spread betting financial markets.

How Profits and Losses are Calculated

Wagers for binary bets are up to the trader and tend to be higher. The reason is maximum profits and losses are known before betting. This is a favourite benefit of traders since risk is controlled.

A trader looks at the binary bet the FTSE closing up today at 51-53. The trader plans on buying the bet and is calculating one’s wager.

If the bet comes in with a £5 wager, the profits would be £235. The trader wants a higher profit so wagers £7 per point on the FTSE. This brings the trader’s profit to a total of £329 on this binary.

The maximum losses can be calculated in much the same way as profits. If the market actually closed under 51 the trader would have lost. The £5 wager would have resulted in a loss of £245 for the trader.

The loss for the £7 wager would have been £343 for this same binary. Profits are calculated by subtracting the closing side from 100. A trader’s losses are calculated the same way using this subtraction.

So, if the market closes high subtract 100-53 for the binary bet. One will subtract 100-51 if the market closes low for the binary bet. This number is multiplied by the trader’s wager to find the losses.

Binary betting is pretty straightforward and thus a favourite market. Traders should be aware binary betting is not regulated by the FSA.

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