Binary Hedge?

Hello,

Could someone please tell me if I have this correct?

On Binary Bet, One 'conventional' bet.

Binary (Stake: $10):
FTSE to close UP for 3 Jan
SELL 33.8 BUY 38.1

BUY @ 38.1
WIN = (100-38.1)* 10 = $619
LOSE = 10 * 38.1 = $381

Conventional:
FTSE to close Below 6310.90
Odds: $1.34
Hedge = $381/1.34 = $284.33

Outcomes:
FTSE Closes UP: Binary WIN $619 Conventional LOSE $284.33
NET WIN $333.67

FTSE Closes DOWN: Binary LOSE $381 Conventional WIN $381
NET EVEN

FTSE Closes UNCHANGED: Need to check the rules on this


Is this correct? Or have I missed something here?

many thanks!

Your binary calculation is fine, but for decimal odds you lose $381 if FTSE is up, and win only 381 * 0.34 = $130 if FTSE is down. That's assuming you are *backing* in decimal odds at 1.34 on FTSE to finish down.

So technically could u use this on every trade and either win or break even????

No, his figures were worked out incorrectly.

If the FTSE finished down, then he would lose $381 on the binary bet and WIN $96.67 on the conventional bet, with an overall net loss of $284.33.



Blu-Ray

SURELY THERE MUST BE A WAY TO HEDGE THESE BETS AT LEAST TO MAKE A MINIMAL LOSS RATHER THAN BREAKING EVEN?

Yes you can, but you would be placing a bet with the binary near 50 and the conventional bet around the 2.00 mark, so you would take a minimal loss, but you would also take a minimal win if correct.

Hope this helps

Blu-Ray

PLEASE EXPLAIN????

I spent quite a lot of time looking at this and I would say in reality it is quite hard to find any opportunity to hedge Binaries.

Yes, my figures in my first post we're quite correct.