Binary Examples
Buying
The FTSE is currently up 5 points on the day, trading at 5300, and you know there is a big US payrolls number out at 1.30pm. You believe the FTSE will have a big move once the US number is announced but you are not sure whether it will be an Up move or a Down move.
So, you decide to ‘buy’ £10 per point of the following binaries:
FTSE to finish up more than 50 points: our current binary price is 8 – 11
and
FTSE to finish down more than 50 points: our current binary price is 6 – 9
You have paid a total of 20 points (11+9) backing a 50-point FTSE move in either direction. If the US payrolls number moves the FTSE as much as you expect and it finishes the day up more than 50 points OR down more than 50 points you make 80 points because:
100 (all Binaries will finish at 100 if the statement becomes true) - 20 (this is what you paid for a 50 point move in either direction) = 80.
Because you bought £10 per point your total profit would be £800 (80 x 10).
If you were proved wrong and the FTSE did not finish up 50 points OR down 50 points you would have lost £200 (20 x 10) as all Binaries will finish at 0 if the statement does not happen. Either way you cannot lose more than £200 whatever happens to the FTSE. All Binaries are strictly limited risk.
Selling
Conversely, if you believe the FTSE is not going to move much, one way to profit is by ‘selling’ a ‘FTSE OneTouch’. A OneTouch is a type of binary (it settles at 0 if the level is not breached and 100 if the level is breached).
For example, imagine the FTSE is currently trading at 5360. The market is quiet and you don’t think the FTSE will move any higher, so you ‘sell’ £10 per point of the ’Daily FTSE 5400 OneTouch’ at 40. By doing this, you have ‘sold volatility’ on the FTSE and will make £400 (10 x 40) if the FTSE fails to hit 5400 during the rest of the day. You will lose £600 (100 - 40 x 10) if you are wrong and the FTSE moves higher and hits 5400 before it closes at 4.30pm.
- Related Info
- Binary Bet Rules