Binary Options: Fixed Odds Financial Bets

This book takes the same fixed odds bet and illustrates how they operate in the financial marketplace.”Binary Options” initially outlines regular bets and explains the rationale defining some basic winning and losing bets. A deeper analysis follows in which the author examines how the value of a bet is dependant on the passing of time, the volatility of the underlying instrument plus the price of the underlying instrument.

Introduction:

As betting markets become more and more sophisticated (epitomised by the advent of specialist sports hedge funds) the crossover between sports betting and financial trading will intensify. Already futures trading by way of spreadbetting has become established in the sports betting market, while in turn fixed odds bets, by way of binary options, are being increasingly used for speculating in the financial and commodity markets.

Binary options (aka financial fixed odds bets, aka binary bets) have a number of characteristics which will enable them to become the most heavily used and popular derivatives instrument. They provide:

1. easy access for the trader via the internet;
2. a limited risk environment for all participants;
3. at expiry greater gearing for the speculator than, for instance, futures, CFDs, spreadbets or conventional options;
4. a far greater degree of flexibility enabling the sophisticated trader to customise his bet to take full advantage of accurate forecasts;
5. a product range that ranges from financial and commodity instruments to sports, political, media and weather; and finally
6. they are tax-free in many jurisdictions.

Binary options are used by people in many countries, albeit under a different name – that of a fixed odds bet. Nowadays many nations have their Kentucky Derby, Breeder’s Cup, Grand National and Melbourne Cup, which attract wagers from a broad range of people; and recently betting on ‘reality TV’ events has become popular. All these betting participants are (unwittingly) buying binary options, and the flexible nature of this instrument will enable it to pervade the lives of many of whom are already avid sports punters but have always shied away from participating in the world of sophisticated financial instruments. Henceforth the term fixed odds bet will be interchangeable with the term binary option throughout this book.

Although this book steers clear of complex mathematics, it systematically analyses the anatomy of fixed odds bets. Hopefully this book will:

• allow the part-time punter to learn enough to eradicate amateurish mistakes;
• open up the financial and commodity fixed odds market to the sports betting enthusiast; and
• provide enough material and new concepts for the professional binary options trader to, at the very least, look at combining different forms of financial instruments with binaries in order to maximise potential profits and minimise unnecessary losses.

Contents:

• Upbets & Downbets
• Theta & Time Decay
• Vega & Volatility
• Delta & Underlying
• Gamma & Delta
• Rangebets
• EachWayBets
• Eachway Rangebets
• Trading Binaries
• Hedging Binaries
• One-Touch UpBets & DownBets
• No-Touch RangeBets
• Trading & Hedging ‘One-Touch’ Bets

Binary Options: Fixed Odds Financial Bets By Hamish Raw pdf