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Why Binary Forex Options are better than Spot Forex

  • #101
  • Jun 15, 2009 6:46pm Jun 15, 2009 6:46pm
Hi guys,
It seems to me that someone said Hedgestreet doesn't accept US accounts. Am I wrong? If I am right I can tell you that they do accept US accounts.I just read their questionaire and it is clear.
Alain1
  • #102
  • Jun 15, 2009 8:33pm Jun 15, 2009 8:33pm
Quoting Dreamliner
Ok guys, why not just select a binary that is heavily in the money, 15 minutes before market close (with IG this is 3:00 ET) and leverage as much as allowed, and take your profits? Yes, the risk reward ratio is horrible, but the trade is "practically guaranteed".

For instance, today I closed out 7 profitable trades that were all heavily in the money, hardly any way to lose on any of them, and made about 20 percent on the account.

I'm sure someone will say this is crazy, risk to reward will kill you eventually, but I'm not sure.

What are...

Would that 1 loss lose the 20% gain?
  • #103
  • Jun 15, 2009 9:55pm Jun 15, 2009 9:55pm
Quoting Dreamliner
Ok guys, why not just select a binary that is heavily in the money, 15 minutes before market close (with IG this is 3:00 ET) and leverage as much as allowed, and take your profits? Yes, the risk reward ratio is horrible, but the trade is "practically guaranteed".

For instance, today I closed out 7 profitable trades that were all heavily in the money, hardly any way to lose on any of them, and made about 20 percent on the account.

I'm sure someone will say this is crazy, risk to reward will kill you eventually, but I'm not sure.

What are...
This strategy can get tough. Because if for example lets say you always buy at 80 which means you pay $80 to win $20 at expiration. If you won 8 out of 10 trades you would actually lose money because of fees. 80(10trades)=$800 & you won 8 trades(100)=800 which means you broke even but with fees you actually are down. And this is winning 80% of your trades. You would have to actually win 5 out of 6 trades which is 83.3% if you stuck with this high probability strategy to profit even a little. Do the math you made 600 trades...which is 600(80)=$48000 & you win 500(100)=$50,000 this amount you get back minus fees when your trades win. So in 600 trades with this same strategy you make 2k minus fees. But you have to win 500 out of 600 trades. With this strategy you always have to have a high winning % to profit. If you can come up with a strategy that can win even 50% of the time & still profit then you are way ahead of the game because you are limiting your losses & you don't have the pressure of having to win at a high rate. But everybody has their way of trading so whatever works stick with it until it doesn't work.
  • #104
  • Jun 15, 2009 10:15pm Jun 15, 2009 10:15pm
Just a few weeks ago a colleague of mine, when told I was into spot forex, recommended that I investigate options because it was "easier" to make money through hedging. I haven't done any serious reading on it, but I just wanted to post so I could subscribe to the thread.
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #105
  • Jun 15, 2009 11:18pm Jun 15, 2009 11:18pm
For some reason I'm missing daily contracts for binary options. I wanted to put a trade before 2am. Anybody having the same issue? Only getting weekly here.

Maybe I'm missing something but these are the trading hours:

http://demo.nadex.com/trade/specs-forex.html
  • #106
  • Jun 15, 2009 11:44pm Jun 15, 2009 11:44pm
Quoting saunga2nd3
For some reason I'm missing daily contracts for binary options. I wanted to put a trade before 2am. Anybody having the same issue? Only getting weekly here.

Maybe I'm missing something but these are the trading hours:

http://demo.nadex.com/trade/specs-forex.html
I'm on the live platform...& no problems.
  • #107
  • Jun 16, 2009 12:27am Jun 16, 2009 12:27am
For what its worth, I think this post is sort of addresses a hidden issue, pretty common with FX traders. Particularly in regards to the risk:reward.

With binary options, you have no choice but to wait out until expiry.

With spot fx, you stare at ongoing price action and risk 'touching' it due to any given number of factors. This is usually what kills most traders; not letting profits run/letting losses run too sharply.

In fact you can trade easily in the same manner with binaries as you can in spot fx, most people lack the discipline to do so.

Binaries are an interesting world. Its a good 'heads up' on the issue. Alot of traders find comfort in using them I find, mainly because of this issue.

Thanks for the thread Yoda!

Quoting Yoda_Glenn
For those who don’t know, Binary Forex Options are a type of option whereby every contract you buy pays out a $100....
  • #108
  • Jun 16, 2009 1:28am Jun 16, 2009 1:28am
Quoting Tjpld
No you're making it to complicated.

Let's asume.
The bet is about the FTSE100 to close above 1080 (made this up).

The Option expires at 17:30 for example.
It is 17:15 and the current price is 1090 so if it stays at that price till expiry you have won the bet and you get 100 USD per contract.
Once your option has expired you will ALWAYS get 100 Dollars if you are right and...
Thankyou for your reply. I do have a tendency to overcomplicate things sometimes. I understand the rules but wasn't sure about the last hour thing. All clear now. Very high risk. If we were trading spot like this you would be screaming at people for the bad r:r , rightly so. I suppose you would need to buy at around 20 with a reward of 80 for a risk of 20 to make it a safe bet. Do you feel there is anyway you will be trading these live in the future?
Thanks
Andy
  • #109
  • Jun 16, 2009 2:11am Jun 16, 2009 2:11am
Quoting BillyRayValentine
With binary options, you have no choice but to wait out until expiry.
Not true. I often buy binaries at 50 and sell them at 80 when I belive it's not going to end "In the Money" on expiry. Still made some profit.

@andypips

I think I will. If I start to feel comfortable and consistent I will start small.
  • #110
  • Jun 16, 2009 3:18am Jun 16, 2009 3:18am
Hi guys,

interesting thread, binary options are totally new for me. Idea - buying binary option eur/usd and usd/chf for negative correlation?
  • #111
  • Jun 16, 2009 3:45am Jun 16, 2009 3:45am
Oanda BoxOptions might be of interest!

http://fxtrade.oanda.com/forex_tradi...fxbox_options/
  • #112
  • Jun 16, 2009 3:47am Jun 16, 2009 3:47am
Quoting geminicz
Hi guys,

interesting thread, binary options are totally new for me. Idea - buying binary option eur/usd and usd/chf for negative correlation?
Because you don't bet on price movement per se I don't think that's going to be of any help here. But I could be wrong.
  • #113
  • Jun 16, 2009 5:07am Jun 16, 2009 5:07am
Quoting Tjpld
Because you don't bet on price movement per se I don't think that's going to be of any help here. But I could be wrong.
Was wondering what you mean by not betting on price movement. Could you elaborate?

From my viewpoint, you could use usd/chf binaries to hedge against eur/usd binaries. But then again....why not just use usd/chf binaries to hedge against usd/chf binaries?
Binary Options Trader
  • #114
  • Jun 16, 2009 5:33am Jun 16, 2009 5:33am
you hedge using same pair?
  • #115
  • Jun 16, 2009 6:07am Jun 16, 2009 6:07am
Quoting Tjpld
Not true. I often buy binaries at 50 and sell them at 80 when I belive it's not going to end "In the Money" on expiry. Still made some profit.

@andypips

I think I will. If I start to feel comfortable and consistent I will start small.

good point.....entry is another issue
  • #116
  • Jun 16, 2009 6:14am Jun 16, 2009 6:14am
Quoting Yoda_Glenn
Was wondering what you mean by not betting on price movement. Could you elaborate?

From my viewpoint, you could use usd/chf binaries to hedge against eur/usd binaries. But then again....why not just use usd/chf binaries to hedge against usd/chf binaries?

When you open a Spot position you assume the USD/CHF will rise 50 Pips when the EUR/USD falls 50 Pips.
But since Binarys are not that "Buy Low Sell High" concept you don't gain when something moves (to some extend maybe) but primarily you want to be above or below a certain level on expiry. This leads me to belive that you can't simply hedge both out. Just some thoughts.
  • #117
  • Jun 16, 2009 7:06am Jun 16, 2009 7:06am
Quoting MoreYummy
you hedge using same pair?
Yup, but of course if the price falls in the middle of your two strike prices, then you lose both sides.
Binary Options Trader
  • #118
  • Jun 16, 2009 11:07am Jun 16, 2009 11:07am
Have you noticed that on the "ladders" you can select one that is already at 100 and yet still profit? You just increase the number of lots you want to buy and you can still profit on them. I wonder how that is, if they are already listed at 100? Anybody know?

Also, the 2 prices that come up, is that for "what you will win" and "what the cost is"? In other words, if it comes up 24.00 and 282.00 does that mean you win 24 and it costs 282?
  • #119
  • Jun 16, 2009 12:45pm Jun 16, 2009 12:45pm
I don't know how that works if you can profit from 100. If you can then what the heck always trade at 100 if you can't lose.
  • #120
  • Edited 1:34pm Jun 16, 2009 1:12pm | Edited 1:34pm
Quoting Dreamliner
Have you noticed that on the "ladders" you can select one that is already at 100 and yet still profit? You just increase the number of lots you want to buy and you can still profit on them. I wonder how that is, if they are already listed at 100? Anybody know?

Also, the 2 prices that come up, is that for "what you will win" and "what the cost is"? In other words, if it comes up 24.00 and 282.00 does that mean you win 24 and it costs 282?
What price was 100? Bid or Ask?
What did it say as open price in your Positions Summary?

I just did that. Paid 100 Dollars for them and will get 100 if they end in the money. Should be practically impossible to make a profit on this.
The current price will go to 100 and my P/L will be 0 USD. Unfortunately you can't buy at 0 on the otherhand.

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