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Binary Betting Guide


Binary Betting 
What is Binary Betting?
Why Binary Betting?
Which markets can I bet on?
Binary Betting Odds
Example - Binary Betting on the FTSE 100
Binary Betting, Fixed Odds Betting & the FS


 
Binary Betting   Top

In this article, we will be examining Binary Betting, one of the many exciting financial products to have become available to private investors in the UK in the past few years. In order to provide you with a better picture of how Binary Betting works, we will be focussing especially on the City Index Binary Betting service. City Index brought Binary Betting into its main website in early 2006 - and made it available either through a stand-alone 'binary' account or through existing spread betting  accounts.


What is Binary Betting?  Top

For those of you who may not have seen it before, Binary Betting is a relatively new type of fixed odds betting that was first introduced into the UK in 2003.

Binary Betting allows you to decide whether an event will or will not occur and hence can have only two outcomes. For example, will the FTSE 100 close 'up' at the end of the day - yes or no? Will the Wall Street close 'up' more than 50 points today - yes or no?

Most people using Binary Betting benefit from the fast, exciting opportunities that it offers - even in a static or falling market. They support their decisions with technical research, charting and statistical analysis - Binary Betting can be as simple or as sophisticated as you chose to make it.


Why Binary Betting?
Top

  • Fast moving markets, even when the underlying market is quiet
  • High volatility with controlled risk
  • Hourly, intraday and weekly markets, a day trader’s dream!
  • Open and Close bets at any time whilst the provider’s binary market is open
  • Maximum profit and loss known as soon as bets are places


Which markets can I bet on?
Top

Binary Betting providers offer a range of markets for you to bet on. Thus, City Index offers a range of traditional index bets on the UK, US and German markets, as well as hourly FTSE markets and 'Touch' markets.

All these bets are binary, with only two possible outcomes. There are several different variations on the theme:

  • Up/ Down Market Movements: Simple bets on whether or not a market will finish up or down at the end of the stated period - typically an hour, day or week.
  • Handicap Markets: Bets on whether a market will finish higher or lower than a specified level from the previous day's close, e.g. will the FTSE finish 'Up' more than 10 points from yesterday's close?

Handicap markets also allow you to bet on a market not moving over this period - useful in a flat or sideways moving market. You can also be bet on an intraday basis (12pm and 6pm markets).
 

Market

Current Betting Options

FTSE 100

Hourly, Intraday & Daily Up/ Down Intraday & Daily Handicap

DAX 30

Intraday & Daily Up/ Down Intraday Handicap 

Wall St

Hourly, Intraday & Daily Up/ Down Intraday & Daily Handicap Daily Touch 

S&P 500

Daily Up/ Down & Handicap

NASDAQ

Daily Up/ Down & Handicap



Binary Betting Odds
Top


In the world of Binary Betting the bid/offer spread is determined by the likelihood of an event actually occurring, with higher odds for an event that is more likely to happen and lower odds for an event that is less likely to happen.

Odds are quoted between 0 - 100, with 0 reflecting an impossible event and 100 representing a certainty.

For example, you may be considering placing a bet on the FTSE 100 finishing 'up' on the day, i.e. finishing at a higher level than it closed the day before.

At 3:00 pm, the FTSE is already up 20 points and the binary price for the FTSE to finish ‘up’ is 80-84, representing a high probability that the market will finish 'up' on the day.

At 4:15 pm, the FTSE is now up 22 points up on the day and the quoted binary price for the FTSE to finish ‘up’ is 94-96, reflecting the increased likelihood of the market finishing ‘up’ at the 4:35 pm market settlement.

These binary odds can be converted into the more traditional fixed odds format of the High Street bookmaker, as in the table below.


Binary Bid/ Offer Spread

Approximate Fixed Odds

4 – 6

20/1

19 – 21

4/1

24 – 26

3/1 

32 – 34

2/1 

49 – 51

Evens

66 – 67

¼

74 – 76

1/3

79 – 81

¼

94 – 96

1/20


A spread of 94 - 96 equates to fixed odds of approximately 1/20 in favour of the market finishing up.

Example - Binary Betting on the FTSE 100 Top

Now let's look at a practical example of how you might use Binary Betting on the FTSE 100. There are a number of possibilities for betting on this index, including hourly, intraday and daily markets for the index to finish 'up' or 'down', as well as the intraday and daily handicap markets.

In this example we are going to place a bet on the FTSE 100 finishing 'up' at the end of the day.

 

1. How to select your market


Log into your account and select 'Binary Markets' from the first drop-down menu within the 'Live Trading' screen.

Select your preferred bet from the available options - in this example we are looking at daily up and down movements on the FTSE 100.

The underlying FTSE 100 market is already down 6.8 points on the day, so the quoted spread reflects the negative movement and shows a price of: Binary FTSE UP 42.2 - 47.4.



  • The 'BUY' column displays the best price available for you to 'BUY' this market, i.e. if you think the FTSE will finish UP on the day you would BUY at 47.4.

  • The 'SELL' column displays the best price for you to 'SELL' this market, i.e. if you think the FTSE will finish DOWN on the day you would SELL at 42.4.


You think that the FTSE is likely to recover in the afternoon so you decide to BUY at 47.4.
 

2. How to place your bet

Go to the 'Trading' tab to the right of the page.

You are presented with a 'buy' price of 47.4 and decide to place your bet immediately.


You must now specify the size of your bet, by setting the amount in £ per point. For example, if you buy this market at £1 per point, you stand to:

  • Win (100 - 47.4 (the current buy price)) x £1 = £52.6 if the FTSE does settle up on the day or,

  • Lose (47.4 (the current buy price) - 0) x £1 = £47.4 if FTSE settles down on the day.


Alternatively, if you buy this market at £10 per point, you will make (100 - 47.4) x £10 = £526 if the FTSE finishes up, or lose £474 if it finishes down.

 

3. How to close your position

If at any point you wish to take your profits, or cut your losses, before the end of the event - i.e. before the market closes at the end of the day - you can 'sell' the market and close your position.
 

For example, if you initially thought the FTSE was going to finish up and you 'bought' the market at 47.4, risking £10 per point, you would stand to win or lose the following, when the market closes at 4:35 pm:

  • (100 - 47.4) x £10 = £526 maximum profit

  • (47.4 - 0) x £10 = £474 maximum loss


However, after a good run the FTSE shows signs of faltering and losing ground towards the end of the day.

The FTSE UP price is sitting at 85.5 - 89.5 and you decide to close your position and lock in your profit. You return to the 'order entry' screen and 'sell' the market, again at £10 per point.

You would lock in a profit of 85.5 (the current sell price) - 47.4 (the price you bought at) x £10 per point = £381 actual profit.

If you have any further questions about the City Index Binary Betting service, please call City Index at 020 7550 8580 .

 

Binary Betting, Fixed Odds Betting & the FSA Top

Please note, Binary Betting is a form of fixed odds betting and is an activity which is not regulated by the Financial Services Authority. The normal protections afforded by the regulatory framework do not therefore apply.



 
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