What Is Binary Betting?

Binary Bets are a new and exciting way of speculating on the markets, and they're very easy to understand. The Spread Betting company will make a market in say whether the FTSE 100 will close UP on a given day. If it does close higher the Binary Bet will settle at 100, if closes lower then the bet settles at 0. In effect if the proposition is correct the Binary Bet goes to 100, if incorrect, zero.

An Example on the FTSE 100 Index

• Assume that the FTSE 100 opens unchanged for the day but the tone within the whole stockmarket looks positive
• The Binary Bet quote for the market closing UP is priced at 59-64
• If you think that the market is likely to close UP (however many points up is irrelevant, 1 point higher is the same as 100) then you'd buy the bet at 64 (on the offer price) risking X Pounds per point
• If the index closes UP the bet will settle at 100 translating into a profit of 36 points X your Pound stake per point
• But if the market settles lower then the bet will settle at 0, for a loss of 64 points X your Pound stake per point
• Of course, like all spread bets the market is consistently being quoted so you can take your profit or loss (if you choose) as the day progresses.

Shorting Binary Bets

You can also short Binary Bets (for an introduction to short selling click here).

• With the above example you can bet against the fact that the FTSE 100 will close higher by shorting the Binary market at 59
• If you're correct and the FTSE does close lower then the bet will settle at 0 for a profit of 59 points X your stake.

So with Binary Bets you can either agree and go long or disagree and go short. Sharp readers will have noticed that a Binary Bet is really nothing more than a traditional fixed odds bet but quoted between 0-100. Therefore if you go long or short a Binary Bet at 50 this is the same as an evens bet at the bookies. A price of 67 points would equate to odds of 2-1 and 3 points would be 33-1 etc. To check the equivalent Binary market as a fixed odds bet click here for the Odds Checker

Summary

Binary Bets are simple, their risk is 100% limited (as the market cannot settle below 0 or above 100) and are pretty flexible. However the Binary markets that are quoted can and do move very fast especially with the hourly Binary Bets which are discussed in the Binary Bet Tutorials section. It's therefore imperative that you don't rush into trading them until you've gained some real-time experience and it's also a prudent policy to bet small when first starting out.