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Why Binary Forex Options are better than Spot Forex

  • #401
  • Jul 24, 2009 1:40am Jul 24, 2009 1:40am
Quoting Coach1959
I remain bullish on the EUR/USD. After the market reopened, I bought an up/down binary on EUR/USD up (> 1.4204) at 30 points. The risk is 30 to make 70. There is some news during the London session, so we'll see.
Note: I closed this trade at 40 for a 10 point profit.
  • #402
  • Jul 24, 2009 3:43am Jul 24, 2009 3:43am
Quoting Coach1959
Nice post kfmfe! This is what I've been thinking about: use the binaries as a "hedge." There will be days I will succeed with binaries where I might not do as well with spot forex trades. Or better yet, days when I do well with both . Plus one great advantage with binaries is you know right up front what your potential loss and/or gain will be.

Regards,

Coach
Thx! I don't know your background, but if you are new to options, I highly recommend that you grab a copy of Natenberg:

http://www.amazon.com/Option-Volatil...8424809&sr=8-1

When starting out, the limited potential loss sounds great, but remember, it doesn't come free: the broker always tacks on extra implied volatility when selling it to you.

Make sure the broker isn't overcharging you for those options!

Good luck!
  • #403
  • Jul 24, 2009 11:01am Jul 24, 2009 11:01am
Alright, so I was looking at IG Markets due to the fact that it has no commission charges. I couldn't see anything about "Fees" like Nadex uses ($1 to open a contract, $1 to close the contract). The other thing that I saw was that the Binary Contracts are listed at $10/point. I guess my question is: If it's $10 a point, do the contracts all settle at $1000 or $0? Or am I missing something altogether here?
  • #404
  • Jul 24, 2009 11:50am Jul 24, 2009 11:50am
Quoting lucashammer
Alright, so I was looking at IG Markets due to the fact that it has no commission charges. I couldn't see anything about "Fees" like Nadex uses ($1 to open a contract, $1 to close the contract). The other thing that I saw was that the Binary Contracts are listed at $10/point. I guess my question is: If it's $10 a point, do the contracts all settle at $1000 or $0? Or am I missing something altogether here?
Hi Lucashammer,

The minimum contract for a binary option with IG Markets is 0.2, which is the equivalent of $2 per point. Since that is the case, to be able to trade the higher probability binaries, like a buy at 90 points for instance, a trader would need a minimum account of $200.

You are correct on the contract settlement, in that since the contract size is $10/Point the value of expiration would be $1000 or $0. So, let's say if you bought a $10/Point contract at 85 (your trading account would have to be at least $850), you stand to make a maximum profit of $150 or lose a maximum of $850. So think about this: you could make 15% profit on ONE TRADE or of course lose your whole account if the loss was allowed to close at 0.

I apologize in advance if this is stuff you already know. I thought it might be helpful for some other traders who might be checking out this thread to have this type of information.

Have a great weekend!

Coach
  • #405
  • Jul 24, 2009 1:56pm Jul 24, 2009 1:56pm
This week the e/u has ranged less than 200 pips for the week. So really no big mystery this week with the euro. No major news came out this week so that had alot to do with it. Stocks had a great week with all the earnings reports. So at nadex you could have traded the futures long & you would have made out like a bandit. Euro has been trading like this for the last 2 months & euro did break an upper trend line this week so this looks bullish at least on the weekly chart.
  • #406
  • Jul 24, 2009 2:50pm Jul 24, 2009 2:50pm
Quoting ferndog
This week the e/u has ranged less than 200 pips for the week. So really no big mystery this week with the euro. No major news came out this week so that had alot to do with it. Stocks had a great week with all the earnings reports. So at nadex you could have traded the futures long & you would have made out like a bandit. Euro has been trading like this for the last 2 months & euro did break an upper trend line this week so this looks bullish at least on the weekly chart.
Yes stocks did have a real good week. In my opinion, the earnings for many companies were set so low in the first place it would have been hard not to beat. Yet the market seems to look past that and the euphoria for recovery continues. I believe we will see a pullback next week on the Dow. I agree with you that the Euro is very bullish. I keep thinking 1.4800 as early as the end of August, but it could be early fall. We'll see. The EUR/USD ranging is totally okay with me though. It is my favorite kind of market.
  • #407
  • Jul 24, 2009 2:55pm Jul 24, 2009 2:55pm
Well today I ended the week in a very satisfactory way. I am very excited about Binary Options. It's too bad so many traders that were contributing to the thread have left. Maybe they'll come back some day.

I'm considering a live account the middle to end of next week. All of you have a great weekend!

Coach
  • #408
  • Jul 24, 2009 3:46pm Jul 24, 2009 3:46pm
Quoting Coach1959
Well today I ended the week in a very satisfactory way. I am very excited about Binary Options. It's too bad so many traders that were contributing to the thread have left. Maybe they'll come back some day.

I'm considering a live account the middle to end of next week. All of you have a great weekend!

Coach
The good thing about spot FX is the lengthy demo periods you can have to refine a method. 14 days isn't really long enough for me to have a clear idea of what I want to achieve. That's me I'm afraid, I've worked hard and studied long to get where I am in the spot market and I'm not ready to plunge into a new arena just yet.

I know there is the possibility of a low value live period but that lasts for 6 weeks only and with business stuff and a 2 week holiday coming up I wouldn't have had time to put myself to the test.

Don't worry, I read every post in this thread and will pick up on the various strategies mentioned. So keep 'em coming.
  • #409
  • Jul 24, 2009 4:48pm Jul 24, 2009 4:48pm
Quoting Coach1959
Well today I ended the week in a very satisfactory way. I am very excited about Binary Options. It's too bad so many traders that were contributing to the thread have left. Maybe they'll come back some day.

I'm considering a live account the middle to end of next week. All of you have a great weekend!

Coach
I have been following this thread with great interest and i hope it continues as well. I have always been a fan of options and I really like the binary options and the possibilities they bring. I been testing the waters with a demo account at Nadex. I have been pretty conservative and i have turned my $25,000 demo account into a $27,144.50 demo account. I am looking to go live next week.
  • #410
  • Jul 24, 2009 9:47pm Jul 24, 2009 9:47pm
Quoting kfmfe04
That's pretty sneaky......
You are absolutely right! All the Greeks are in full force on binary options.

The spreads at IG can be anywhere from 4 to 7 points. It seems to me that the closer to at-the-money the option is, the wider the spread.

The binary market handed me my teeth this week.

Good luck!
  • #411
  • Jul 25, 2009 5:43am Jul 25, 2009 5:43am
i LOST 22k just yesterday trading binary options !

this is pure gamblig unless u know where markets are gonna go...does anyone know what is the limit when u buy binary options? can you buy 1000$ per point?

maximum i did was 100$ but i wonder if there is any limit and how this is processed? who takes the other side of binary option....in my opinion is the broker
  • #412
  • Jul 25, 2009 8:45am Jul 25, 2009 8:45am
Quoting reres
i LOST 22k just yesterday...
OUCH!!!
  • #413
  • Jul 25, 2009 3:28pm Jul 25, 2009 3:28pm
Quoting PeterFM
The good thing about spot FX is the lengthy demo periods you can have to refine a method. 14 days isn't really long enough for me to have a clear idea of what I want to achieve. That's me I'm afraid, I've worked hard and studied long to get where I am in the spot market and I'm not ready to plunge into a new arena just yet.
Makes total sense. I have spent a number of years refining my skills in the spot forex market as well. I agree with Yoda that an understanding of trading spot forex is extremely valuable. The biggest problem for me is that I'm so used to scalping spot forex and getting quick returns, I find myself getting a little impatient waiting for the expiration time, lol. I know that will change as I get more used to trading binaries. My plan is to have separate accounts for binaries and spot. I will trade spot while I'm waiting on the binary options, hehehe!

I'm very happy to hear you are still reading the posts in this thread. I have always enjoyed reading your thoughts on trading.

Coach
  • #414
  • Jul 25, 2009 3:39pm Jul 25, 2009 3:39pm
Quoting cmoon10
I have been following this thread with great interest and i hope it continues as well. I have always been a fan of options and I really like the binary options and the possibilities they bring. I been testing the waters with a demo account at Nadex. I have been pretty conservative and i have turned my $25,000 demo account into a $27,144.50 demo account. I am looking to go live next week.
Excellent job cmoon . Best wishes for your success trading your live account.

Coach
  • #415
  • Jul 25, 2009 3:41pm Jul 25, 2009 3:41pm
Quoting Coach1959
Makes total sense....
Correct me if I'm wrong but I think you can close out before expiry if you want to. There may be times when some profit is better than a loss. It depends on what your trading style is and what sort of binary you've taken.
Quote
I'm very happy to hear you are still reading the posts in this thread. I have always enjoyed reading your thoughts on trading.

Coach
Thank you
  • #416
  • Jul 25, 2009 4:26pm Jul 25, 2009 4:26pm
Quoting reres
i LOST 22k just yesterday trading binary options !

this is pure gamblig unless u know where markets are gonna go...does anyone know what is the limit when u buy binary options? can you buy 1000$ per point?

maximum i did was 100$ but i wonder if there is any limit and how this is processed? who takes the other side of binary option....in my opinion is the broker
WOW! Very tough day! Hopefully that was a demo.

There is no type of trading that doesn't carry an element of risk. I have never known of anyone who knows where the markets are going. Through sound technical and fundamental analysis a trader can make a more informed judgment on which way price will go, but the market has a way of frustrating even the best of traders. After sound analysis, the only way a trader can combat the risk that is presented on each trade is through discipline and money management. I am in no way criticizing you or your method of trading. I suppose it does make me bristle a little when the "gambling" word is used for trading. I don't look at the way I trade or the strategies I use as gambling. This is something I won't talk about in this thread again, mainly because I'm afraid this will turn into a discussion about gambling versus trading. There have been some threads in Forex Factory with pages upon pages where this was discussed.

The limit for one binary transaction with IG Markets is 5 contracts or $50/Point. Now I'm not sure if you could carry multiple 5 contract positions on the same binary. You could check with your broker. I am real new to binary options so I have no real comment on whether the broker takes an opposite position. I will try to find out.

Best of trading to you this week reres!

Coach
  • #417
  • Jul 25, 2009 4:42pm Jul 25, 2009 4:42pm
Quoting Coach1959
WOW!...

it was on real account...wish it was on demo.

i traded on IG index and i could bet 100$ per point. so 50$ per point is not the limit?? where did u find out about 50$ ?
  • #418
  • Jul 25, 2009 4:50pm Jul 25, 2009 4:50pm
Quoting PeterFM
Correct me if I'm wrong but I think you can close out before expiry if you want to. There may be times when some profit is better than a loss. It depends on what your trading style is and what sort of binary you've taken.Thank you
Peter, you are correct. You can close a position at any point during the life of the option. I copied this from the IG Markets UK website:

"Continuous dealing prices

We quote a continuous price until very shortly before the underlying market closes. So you can close your position without waiting for the market settlement."


You may also have some more options for a broker since you live in the UK. As far as I can tell, we have two here in the US, Nadex and IG Markets.


I closed a number of trades this week for a small profit. It looked like price action was going against my binary so I just closed it. The main learning experience for me was NOT to let the market close me at a loss at zero. One time is too much but it happened a number of times. So my lesson for the week is that I can close the losers early too, lol. I found you can actually "scalp" on the binaries, especially if they are close to expiration and price is hovering around the strike price. I saw it at least twice this week on the up/down ladder with IG Markets. One was AUD/USD and the other was EUR/GBP.

Coach
  • #419
  • Jul 25, 2009 5:00pm Jul 25, 2009 5:00pm
Quoting reres
it was on real account...wish it was on demo.

i traded on IG index and i could bet 100$ per point. so 50$ per point is not the limit?? where did u find out about 50$ ?
Reres,

I can't seem to find it on the website. It's possible I heard that from the broker when I called them this past week. At any rate, I will find out for sure on Monday.

Sorry to hear your loss was on a live account.

Coach
  • #420
  • Jul 25, 2009 5:01pm Jul 25, 2009 5:01pm
Quoting Coach1959
You may also have some more options for a broker since you live in the UK. As far as I can tell, we have two here in the US, Nadex and IG Markets.

Coach
Yep, we have IG Markets in the UK and as there are tax and stamp duty benefits to this type of trading I suspect it's where I will end up.

In addition there are several spread betting brokers but they are a different kettle of fish and not my first choice. The tax advantages still apply but as I understand it are more like bookmakers (many of them started out that way) and are trying to 'round' their books by price manipulation, allegedly. Some of them even offer odds as per a bookie. I don't think you have this style of borker (spread-betting) in the States and I'm not sure you can sign up for a UK binary borker either. I guess your IRS don't like the idea of people making money and not paying taxes. But there again if the UK's fundies don't improve our lot may start looking for extra sources of tax revenue over here as well .

At least the strike prices for IG et al are based on an industry recognised source and have to be honoured if met.
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