Very low volume on Binexx?

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Old Nov 15, 2005, 4:43pm   #33
Joined Aug 2004
And we all know that binary options aren't covered under FSA regulations, therefore they'll keep doing it.

You've just got to trade under their radar screens, keep size small, don't do too much scalping, just let positions run more, take losses on the head, and don't complain to them (as then your account will be watched like a hawk, then see the number of non-fills go up!).

But Binary Options are great fun, and a bit addictive!!

rgds
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Old Nov 16, 2005, 9:28am   #34
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Originally Posted by apples10
I've actually stopped using my models for the binary business I do, it was clouding my opinion too much and I spent a lot of the day working out what implied the mm were using in their models. I just trade like anything else now, if I think its going up I buy e.t.c.

I am making money over a period, but go through periods of hell, like everyone.

But the worst pain I had trading binary options was when I realised that one of the exchanges/SBs had the wrong expiry time in their model - of course I traded very large (transacted small lots over a couple of hours) - the mkt closed with me being 10 points in the money anf the binary still showing 80/85, they then realised and closed the market - - - - guess what then - - - - -the closing auction move was 12 points !!!!! A CLASSIC !!!!!


Ananymous :- bb = broadband
Apples…

As you say, ‘Binaries’ are quite exciting and indeed can be quite addictive. My point however is that you can turn your ‘hobby’ into a profitable income flow providing you develop a reasonable system.

You actually developed you own binary model then? That is quite interesting. I’ve never considered doing that. Can I ask what you primary purpose for developing the model was? Was it just interest or did you have a theory which lead you to believe that you could gain some kind of edge with your own model?

As I said before, I’ve tended to adopt a ‘think outside the box’ type strategy for trading these products. You don’t really need to develop a model of your own to detect these opportunities, it just comes down to pure common sense and reasoning once you think that you see something.

As for your trade which you outlined…I would agree, it seems really bad luck that is screwed up. This is where having accounts with several different companies can pay off. You then have an opportunity to lay off part or all of your exposure with another account. This obviously lowers your risk or indeed can completely lock in your entire profit. A word of warning though…the word is that most of the spreadbetting companies don’t really like people who trade in that manner. They see it as a form or arbitrage which disrupts their basic theories in their business model. They detect potential arbitrage customers by monitoring people who consistently let bets run to expiry and also monitor increases in bet size.

As someone already pointed out – The nature of these products is such that ‘errors’ will always be made. They key is detecting them.

Steve.
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Old Nov 16, 2005, 10:20am   #35
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hi Steve,

developed the model just to see what parameters the firms were using on their pricing, the main factor obviously being what implied volatility. However, I hardly use it now, as I said, it was of little beneficial use.

For instance, at the moment, on the hourly, binexx are using 9% implied. However, if you look at the 30-minute realised vol of the Dec Future it is at 23.7% (the Future is quite volatile this am, there have been 23 occasions already where the 1-minute move has been above 2 points), therefore they have the wrong price at the moment - if the present realised volatility remains. But I'm not temted to buy, as I don't think it'll bounce in the next 20 mins, but will be worth checking again on the 10:30 expiry.

Unfortunately our firewall stops the ig/binary tradescreen from working, so I'm stuck with using Binexx, which is why I only deal as a hobby! Keep thinking about getting a vodafone 3g card for a laptop to trade IG, I should do it really!
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Old Nov 16, 2005, 12:16pm   #36
 
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Quote:
Originally Posted by stevespray
. A word of warning though…the word is that most of the spreadbetting companies don’t really like people who trade in that manner. They see it as a form or arbitrage which disrupts their basic theories in their business model. They detect potential arbitrage customers by monitoring people who consistently let bets run to expiry and also monitor increases in bet size.
Quote:
Originally Posted by apples10
You've just got to trade under their radar screens, keep size small, don't do too much scalping, just let positions run more, take losses on the head, and don't complain to them (as then your account will be watched like a hawk, then see the number of non-fills go up!).
Conflict of opinion there regarding running bets to expiry?
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Old Nov 16, 2005, 12:19pm   #37
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Originally Posted by jules101
Conflict of opinion there regarding running bets to expiry?
That very much depends on the bet size I guess. In order for an arbitrage to make big money the stake has to be big as the trade is only normally locking in a few points. My own point is that the companies detect people trading in that manner through what they see as a known pattern of trading develop.

Steve.
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Old Nov 16, 2005, 12:26pm   #38
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Originally Posted by jules101
Conflict of opinion there regarding running bets to expiry?


I'm not arbing, and only dealing in small size.

so the 2 comments are mutually exclusive as they refer to different trading styles. Mine how to avoid being spotted as a scalper (when you'll get lots of 'no fills') and Rivers on arbitrage trading (when the firms will block your account completely!).

rgds
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Old Nov 16, 2005, 12:58pm   #39
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Quote:
Originally Posted by apples10
hi Steve,

developed the model just to see what parameters the firms were using on their pricing, the main factor obviously being what implied volatility. However, I hardly use it now, as I said, it was of little beneficial use.

For instance, at the moment, on the hourly, binexx are using 9% implied. However, if you look at the 30-minute realised vol of the Dec Future it is at 23.7% (the Future is quite volatile this am, there have been 23 occasions already where the 1-minute move has been above 2 points), therefore they have the wrong price at the moment - if the present realised volatility remains. But I'm not temted to buy, as I don't think it'll bounce in the next 20 mins, but will be worth checking again on the 10:30 expiry.

Unfortunately our firewall stops the ig/binary tradescreen from working, so I'm stuck with using Binexx, which is why I only deal as a hobby! Keep thinking about getting a vodafone 3g card for a laptop to trade IG, I should do it really!
Apples…

Very clever stuff. It looks like you are already in to the realms of ‘advanced strategies’ regarding these binaries. The question is….Does this give you enough of an edge to be consistently profitable. By that I don’t mean ‘win every trade’. I’m asking if, over a period of say 20 trades, do the swings outweigh the roundabouts. In theory if you have an edge and you trade it with good money management then you will turn a net profit. Essentially with binaries you are just looking to detect a ‘value opportunity’. In other words, is the company’s ‘miscalculation’ (in this case the implied vol) sufficient to make the companies market significantly different to what you believe it should be? For example, if you think that the market should be 55 mid and you see it at 66-69 then there is clearly sufficient room to develop a very successful system to take advantage of this.

Back to my theories / practices of ‘thinking outside the box’. I am wondering how the companies pricing models work when certain known and predictable events occur.
For example, we know (in advance of the event) that certain releases of US economic data has a very good chance of moving the markets. (Things like NFP’s, GDP and sentiment indicators.) How do the companies integrate this into their pricing models?
As a practical example I would site the following situation…compare the movement of the FTSE between 12noon – 1pm and then the movement between 1pm and 2pm on a Non Farm Payrolls day. The market is clearly much more likely to move a good distance in that second hour than in the first. How do the pricing models for hourly FTSE deal with that? Do the implement a different model? Most options related models use historical data to produce the variables which feed into the model. A model which works this way can not discount the known fact that an event is going to occur in the future.

The same type of scenario can be attached to almost all the markets which the different companies offer on binaries. If their models are using purely historical data then we can gain an advantage through our knowledge of the future. Let me give an example of a bet I used to play. One of the companies offers a bet on ‘FTSE to close up >30’. They also offer ‘FTSE to close down >30’. If you sell both those bets then you will win if the FTSE closes anywhere between -29.99 and +29.99. If you lose then you can only lose on one of the two bets as both be outcomes are not possible on any given day. I used to play that bet on days when they US markets were shut but the FTSE was still trading. Why did I choose they days to play?? I choose these days because I could see that for the most part the FTSE’s movement (provided the FTSE wasn’t marked up / down heavily overnight) was purely determined by what the US did between say 1.30pm and 4.30pm (London time). Therefore I determined that the companies pricing model factored in a level of volatility brought about by those 3 key hours of US market activity. If therefore I knew in advance (which of course you do) that the US wasn’t trading I knew that a majority of the pressure on the UK market was not likely to be a factor on that given day. The result was that at about 7am, providing that FTSE was no more than say +/- 6 from the previous day, you could sell both bets for between 21 – 23 points on each. This normally gave a total of about 45 points from both bets combined and you knew that only one out of the two bets could possible lose. So it equates to a simple risk / reward. You either make 45 points or lose 55 points. Either myself or friends (under my advice) did this bet quite a few times. In 9 bets which we recorded we only lost once (and that was on a day where I broke my rule and we traded when FTSE was down 11 at 7am). So you basically had a situation where the book maker was offering almost 50/50 whilst you knew that the odds of the event happening where considerably longer. As a result a good fat profit was made.

The question is….how many different scenarios like this one can you dream up based on all the different types of markets offered? There are so many types of binaries with so many different companies that I think it is impossible for them to have ‘covered all the exits’.

Steve.

Last edited by stevespray; Nov 16, 2005 at 1:06pm.
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Old Nov 16, 2005, 1:29pm   #40
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i did a study of my binary betting over a 3-month period, i was doing on average 9 trades a day and was making on 68% of trades - but this using various techniques and not really using the model - as if they've got the wrong price, so what (unless you are arbing) - if you get the direction wrong, you still lose.

I've also done various 'quiet' day trades similar to yours. I made a lot of dosh during one quiet spell from oct2003 to dec2003 by seeing what the Dow had done at 9pm, then choosing 2 10-point ranges on the FTSE 12pm, buying them for a total of about 37 and waiting , the 2:1 p/l ratio was excellent return, made 100 on 2/3 days - sometimes even managed to 'job-out' of the 2 positions for 100+ (my max was 114!!).

Think same strategy may work in the couple of weeks before the next fomc, but bloody Binexx don't do range trades.
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