retail binary option software?

Discussion in 'Trading Software' started by Jackshark, Jan 26, 2011.


  1. Anyone playing around with this? Thanks, surf
     
    #21     Mar 28, 2011
  2. Lucias

    Lucias

    I trade the CFTC regulated NADEX spreads and binaries via IGMarkets. These are good products for the serious beginner. There are a lot of markets offered including commodities, many world markets, and forex. No individual stocks but everything a global macro trader would want.

    The NADEX binaries are offered at various strikes. So it is just like calling direction from any strike. Your 50/50 payout will be the ATM strike. If you want to choose another strike, you can.

    Let me show a purely hypothetical example

    Market = 100

    > 120 10 / 90
    > 110 25 / 75
    > 100 50 / 50
    > 90 75 / 25
    > 80 10 / 90

    This is just like calling direction UP or DOWN from ANY STRIKE. It is very simple. Short the binary if you think the market will go down, buy if it will go up. You can trade them in and out. You can wait until the market hits a support/resistance and take a 50/50 bet or buy below support, i.e sell above resistance and take a lesser payout. Nadex offers both intraday, daily, and weekly binaries.

    You can trade them in and out too. So for example, let's say you short a 50/50 binary with 2 lots then that means you will risk be risking $198 to get that last $4. That is you will be risking your $98 profit plus your collateral. However, the market is also stating you have a 98% chance of getting that last few dollars. So, you can hold until expiry which can be pretty intense or trade in/out. Because they are exchange settled, you don't get "stopped out" -- even if the binary goes to zero then it is still in-play until expiry.

    So that's the good news. The bad news is that most TA methods are no better then 50/50 chance.

    You will also pay about $3 spread and then $1.50 per contract or about $4 to $5 to trade these. Each binary is only worth $100. That means your win rate should be around 5% better then chance to break even/profit. It doesn't sound like much but that's a fairly big edge. However, you gain the advantage of never being stopped out and getting to play with contracts/markets that would otherwise be unavailable to you.

    I would like to see a simple option pricing software for binaries & spreads that I can use to compute the value. Of course, we know the ATM is 50/50 bet with perhaps a very slight bias for the trend. I assume they use a binomial distribution(?)

    So yeah, I would take a look at IGMarkets and their NADEX products if you are interested in something like this. I think it is good for a beginner because most beginners get killed via stops or trading too big.

    There is really no way to "game the system". However, you can go long/short any product which keeps it fair.

    The only way you could "game" the system is if they offered you a better then 50/50 ATM bet. In which case, you could arbitrage it with another broker or via the market. I don't see anyone doing that though unless it was a temporary signup bonus or something.

    I don't understand the anyoption. It sounds like they are taking about a 14% edge which is huge. That would be a fast way to the poor house.

    It sounds like they only payout 70% because they return the other 15% to the loser. Add the max payout 71% plus the "generous" 14% return and you get 86%. This means they are taking a 14% edge which isn't fair if this is an ATM. A reasonable market maker edge/"house edge" would be imo around 1.7% to 5%.

     
    #22     Mar 28, 2011