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Why Binary Forex Options are better than Spot Forex

  • #141
  • Jun 16, 2009 3:56pm Jun 16, 2009 3:56pm
Quoting Tjpld
http://www.youtube.com/watch?v=UNksTekc_qU

LOL just to give you guys a quick laugh.
Just stumbled upon this on Youtube.
What a freaking loser.
Just give me your 10 grand and I'll make you 12 percent in one day. Of course you may lose it all. But hey!
  • #142
  • Jun 16, 2009 4:01pm Jun 16, 2009 4:01pm
Ok. I tried a couple of these today and closed them out before time for a profit. I have noticed one thing though as follows.
Trading live with ig index. £1 live.
One touch eurusd at 13810 to close at 8 pm today bst(gmt +1). ie the bet settles at 100 if 13810 was touched. I entered at 16.13 bst for 8.1 on a buy (I was thinking it would head that way) Spot price was 1.3908 and I entered short also with a 20 point stop. Closed the binary at 18.04 at 46.6 for £38.50 as I had to go out and didn't feel it was going to make 13810 for my £82. I also closed the spot trade for the same and got about £70.

So the spot paid better. I looked at the trade and it dawned on me that although the spot was a better result my max loss on the binary was 8 points compared to 20 on the spot. Add to that indiscipline in perhaps moving the stop a little if I had entered too early and it could become worse. With the binary there is no stop to move. The eu could have gone on up another 40 and I would have stopped out only to retrace whereas the binary sat there at max 8 loss with nearly 4 hours to get back down and show some profit. Now if I was to up the stake to £5 my max loss = £40 compared to £100 or more on the spot. If the binary had run its course the payout between would have been close to the same but the loss exposure is much less if you intend to close early in profit. I will try this again but busy tmw. Perhaps someone else could give it a go and report back. Please let me know if 1)I was just purely lucky 2)any of the above makes sense 3) it works for you and you want to buy me a pint.
Cheers
Andy
  • #143
  • Jun 16, 2009 4:03pm Jun 16, 2009 4:03pm
I will try to trade the Binary Price Chart directly in the next days rather than predicting if it's going to end in the money.
If you do that you have to buy them at 50 just to get a risk reward ratio of 1:1

http://img196.imageshack.us/img196/6853/binary.png
  • #144
  • Jun 16, 2009 4:05pm Jun 16, 2009 4:05pm
Quoting Tjpld
http://www.youtube.com/watch?v=UNksTekc_qU

LOL just to give you guys a quick laugh.
Just stumbled upon this on Youtube.
What a freaking loser.
Where do i sign up? This guy is a genius. Ha Ha
  • #145
  • Jun 16, 2009 4:06pm Jun 16, 2009 4:06pm
Quoting Tjpld
I will try to trade the Binary Price Chart directly in the next days rather than predicting if it's going to end in the money.
If you do that you have to buy them at 50 just to get a risk reward ratio of 1:1

http://img196.imageshack.us/img196/6853/binary.png
Ok you peaked my interest again. How do i get that chart on ig demo?
  • #146
  • Jun 16, 2009 4:18pm Jun 16, 2009 4:18pm
Just go in your Navigator.
Select to Binary of your choice and left click it.
In the Dropdown select -> Professional Chart for the one I posted.
Or Quick Chart ... for... a quick chart.
  • #147
  • Jun 16, 2009 4:27pm Jun 16, 2009 4:27pm
Quoting Tjpld
Just go in your Navigator.
Select to Binary of your choice and left click it.
In the Dropdown select -> Professional Chart for the one I posted.
Or Quick Chart ... for... a quick chart.
Yea i did that but it only has binary for forex not for the dax. And all the other options are for commodities, metals & energy on the navigator.
  • #148
  • Jun 16, 2009 4:31pm Jun 16, 2009 4:31pm
There are Binary for everything on IGMarkets.

Indices, Energy, Forex, Stocks, etc.

http://img294.imageshack.us/img294/9207/navi.png


DAX = Germany 30
  • #149
  • Jun 16, 2009 4:34pm Jun 16, 2009 4:34pm
Thats crazy because my navigation don't have all of that you are showing. Gotta call them up. You are on demo right?
  • #150
  • Jun 16, 2009 4:38pm Jun 16, 2009 4:38pm
I think i know why now. There are different platforms for us, uk, australia etc.
  • #151
  • Jun 16, 2009 6:26pm Jun 16, 2009 6:26pm
The spread on binaries are very high comparative to trading the cash market. Although there are definitely advantages to Options, in my trading experience, binary options are too thinly traded and the bid/ask it to high.

Instead of trading binary why not just trade plain vanilla options, at least the spreads are lower and the liquidity is much higher.

I am not trying to discourage anyone from trading binary options, however I feel that if can do understand the math and pricing behind these options then you should not be trading them. In many cases, brokers simply create a synthetic that will completely offset the risk of the binary and just mark up the option they sell to you.
  • #152
  • Jun 16, 2009 6:33pm Jun 16, 2009 6:33pm
Some people look like they are getting excited about these Options contracts, but are we not still left with the same puzzle to solve? You will lose your arse without a consitent way to determine a directional bias.
Living the adventure in my head.
  • #153
  • Jun 16, 2009 6:36pm Jun 16, 2009 6:36pm
Quoting Leonlorenzo
Some people look like they are getting excited about these Options contracts, but are we not still left with the same puzzle to solve? You will lose your arse without a consitent way to determine a directional bias.
Yes, and no. For instance, on the current binary I am on, I will make money if the market goes up, goes sideways, or goes down...a long way! The only way I won't make money is if it goes down farther than the daily average.

So I don't have to have the direction correct, in fact I can be wrong on the direction by a lot, and still make money.
  • #154
  • Jun 16, 2009 6:40pm Jun 16, 2009 6:40pm
Quoting Dreamliner
Yes, and no. For instance, on the current binary I am on, I will make money if the market goes up, goes sideways, or goes down...a long way! The only way I won't make money is if it goes down farther than the daily average.

So I don't have to have the direction correct, in fact I can be wrong on the direction by a lot, and still make money.
Just a little confused, so you will make money as long as the price doesnt move more than the ADR in any direction? If so, what are you risking for what kind of gain?

Cheers,
Leon

Ps. The 'will make money If it goes down a long way' and 'wont make money If goes down farther than the daily range' part is what confused me.
Living the adventure in my head.
  • #155
  • Jun 16, 2009 6:44pm Jun 16, 2009 6:44pm
Quoting Leonlorenzo
Just a little confused, so you will make money as long as the price doesnt move more than the ADR in any direction? If so, what are you risking for what kind of gain?

Cheers,
Leon
I purchased a call option at 1.3690, and at the time the EUR/USD price was 1.3840 which is 150 pips above the strike price. Average daily movement on Eur/Usd is 110.

If the market moves up from 1.3840 I make money, if it goes sideways I make money, if it goes down, clear down to 1.3691 (149 pips) in the next 20 hours I make money.

If it closes below 1.3690 I lose money.

I am risking 88 to make 12. Horrible risk to reward ratio.
  • #156
  • Jun 16, 2009 6:53pm Jun 16, 2009 6:53pm
Quoting Dreamliner
I purchased a call option at 1.3690, and at the time the EUR/USD price was 1.3840 which is 150 pips above the strike price. Average daily movement on Eur/Usd is 110.

If the market moves up from 1.3840 I make money, if it goes sideways I make money, if it goes down, clear down to 1.3691 (149 pips) in the next 20 hours I make money.

If it closes below 1.3690 I lose money.

I am risking 88 to make 12. Horrible risk to reward ratio.
Cheers, I understand now.
Living the adventure in my head.
  • #157
  • Jun 16, 2009 7:48pm Jun 16, 2009 7:48pm
Today I tried the new daily one touch Eur/Usd, live.

The market started to drift lazily down as soon as I entered the position, so I closed it for a 21 point loss.

I Sold an at-the-money “to be above” binary for 44 points and the market continued to slowly drifted down from there.

Net 23 point gain.

I show this only as an example of how you can move in and out of the trades. No need to watch a looser go to zero. You can close it and try again, especially if you picked the wrong direction.

siafx
  • #158
  • Jun 16, 2009 10:27pm Jun 16, 2009 10:27pm
Yoda, can you help us understand how you do this?

For instance, let's use the EUR/USD monthly one-touch on IG:

Right now we could buy the 1.3300 for 20.00 (current price is 1.3841).

We are then to sell at the same price, so examining the options available, it looks like the closest option we could come to would be to sell the 1.3700 for 66.5, as there are no other options to sell for 80, which is equivalent to buying at 20.00.

So we sell at 1.3700 meaning we do not believe the price will touch 1.3700 and we have bought at 1.3300, meaning we do believe price will touch 1.3300. So we have put ourselves in a position where we do not want price to come down to 1.3700, but we do want it to come down to 1.3300.

This obviously does not make sense.

If price stayed where it is at right now, at 1.3841, we would lose 20.00 on the buy and lose roughly 35.00 on the sell.

Can you give some better examples?

Thank you.

Quoting Yoda_Glenn
A....
  • #159
  • Jun 17, 2009 2:18am Jun 17, 2009 2:18am
Quoting siafx
I show this only as an example of how you can move in and out of the trades. No need to watch a looser go to zero. You can close it and try again, especially if you picked the wrong direction.

siafx
Yes this is an option to minimize the risk and greatly incease Risk Reward.
If you Option is not in the money 3 minutes before expiry it's still better closing that position than letting it expiry and turn to 0.
  • #160
  • Jun 17, 2009 2:50am Jun 17, 2009 2:50am
Dreamliner wrote:

I noticed that on the IG platform, demo is much different than live. I was demoing until yesterday and at roughly 15 minutes before close there were lots of options to choose from all between 80-90. Today on the live, there were only a few to choose from, and the best I could find was 97.5. So I risked 100 to make 2.5 and won. Increased m account size my 2.5%.

Obviously not a good long term strategy, as just one loss will wipe out all wins. Not sure what to do now, maybe I'll play it until I get plus 10% in the account and then close out the account.


In this case ( only 15 pips in the money before 15 min expiry ) i should go on short position, price for short was aproximately 5-6, risk reward 1:15, return 1500 % !!! Day by day i will take this "garbage" contracts.

Calculation:

trade 1 - 15 lose, 1 point á 10 USD, lose 900 USD
double bets
trade 16 - 19 lose again, total lose is now 1380 USD ( 900 + 480 )
trade 20 win, profit 1880
total profit 530 USD

initial deposit 5000 USD
monthly return 10,6 %
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