BetaExoticBets

Blue-Ray, I switch the bet type according to the length of the trade and my market view. There are a huge number of factors but, for example:

1) I tend to use the Time Switch bets for anything over a couple of hours as the risk is far lower. By locking in the profit every half hour or so I know I'm so much less likely to lose my shirt. I don't mind risking my whole stake on binary for short term positions but as markets can change so fast I feel more comfortable that way.

2) If I'm making a pure directional play for more than a week (which I've only done once on there since they went on for real money) I will use Lookback bets for a similar reason to above (odds of losing all money are greatly reduced and potential payoff is great).

3) For most of the bets I do (15 to 20 minutes) I use binary and binary ranges predominantly.

4) I have started a new No-Touch system which is going well so far but I'm only 24 hours into it.

The only bets they have which I won't trade are the Trend Multipliers - too hard to call for me.

There is a lot there and the ability to create bespoke expiry times, strikes and payouts gives me the edge I don't get elsewhere. Like you I want to do some index stuff, their help desk said they were a week or two away when I asked on Monday.

Though I pride myself on discipline I have got a bit carried away on a couple of silly ones and been sorry after - 19/1 bets are almost never a good idea ;-)

This GBP/USD move has made my day but I'm going to stick around for some Yen volatility tonight. I do get a little bored watching the screen waiting to see what comes in though. Still, beats the alternative.

What are your strategies, having shared a lot of info I would love to hear more.

NQR
 
Thanks for all the info NQR


I'm mainly doing the binary bets on the 15 minute range, purely based on directional play and as you said earlier in this thread, the OTM bets are the best.

I have a system based around momentum and S/R levels, it's going okay, but I'm always testing out new ideas throughout their bet ranges.

Good to hear your ideas, thanks very much

Blu-Ray
 
nice NQR, i think i will open an account then, if you can win 12k in days and not be barred, as I would be satisfied getting 5k from them before being stopped.

These short term binaries do seem easy money though and if they do hedge then it would imply that the strategy was able to be replicated in the real market, but there is no way you could make money in the real market this easy, as once everone knows something is easy money, it doesn't work anymore. Maybe the other types of bets are hedgeable but i understand you are making most of your money from the binary bets?
 
Hi,

Yep, mainly binarys at BetsForTraders but a fair bit of other stuff as well. Stepping up the TimeSwitches, a few Lookbacks (2 now) and some No-Touches. I would say it is about 80% binary though.

I think they run a lot of bets through the system and match punters off against one another to some extent. A lot of it is hedgable in terms of their greek exposure on the binary bets on residual risk though, I think I could do it.

Go for it, let me know how you get on. Us fixed odds guys are a pretty niche group, there isn't enough chat about them on here I don't think.

NQR
 
NotQuiteRandom said:
Hi,

Yep, mainly binarys at BetsForTraders but a fair bit of other stuff as well. Stepping up the TimeSwitches, a few Lookbacks (2 now) and some No-Touches. I would say it is about 80% binary though.

I think they run a lot of bets through the system and match punters off against one another to some extent. A lot of it is hedgable in terms of their greek exposure on the binary bets on residual risk though, I think I could do it.

Go for it, let me know how you get on. Us fixed odds guys are a pretty niche group, there isn't enough chat about them on here I don't think.

NQR
Click to expand...

They are insane if they are hedging out their short term greeks as the frequency of hegding will kill them in transactions costs also digitals should be left as a bet and they shouldn't have their greeks hedged away as there is so much risk associated with the dis-continuous payoff. If they are hedging their greeks then good luck to them as one day they will get badly hurt.
There is an ok chapter in Taleb about this.
 
NotQuiteRandom said:
This GBP/USD move has made my day but I'm going to stick around for some Yen volatility tonight. I do get a little bored watching the screen waiting to see what comes in though. Still, beats the alternative.

NQR
Click to expand...

The alternative being sitting in a darkened room not looking at the screen. Remember, you need vitamin D or else you will get rickets.

Anyways, betsfortraders eh? they are claiming they have a transparent platform but these bets seem anything but. If they are hedging in the market then that means you are getting a rip off price as they are just retailing - likely as you have to show your hand before placing a bet.

I seriously doubt they have the volume on quite complicated bets to be matching risk off on both sides.

I'm going to give them a go but I'm not very keen on their website. orange and blue? plus their charts don't work on any of my machines. I don't think their range of products is going to have a very broad appeal tho. Still, if NQR isn't just talking out of his hat, then there seems to be money to be made.
 
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Robertral said:
They are insane if they are hedging out their short term greeks as the frequency of hegding will kill them in transactions costs also digitals should be left as a bet and they shouldn't have their greeks hedged away as there is so much risk associated with the dis-continuous payoff. If they are hedging their greeks then good luck to them as one day they will get badly hurt.
There is an ok chapter in Taleb about this.
Click to expand...




Maybe, but think of it this way. Lets assume you have 10,000 bets on your book distributed across 10 markets with a mean expiry time of 'a' and variance 'b'.

We can't assume a normal distribution of bets from one minute to the next as we don't know how the book looks but over the long run we must assume that it reflects the market given the number of assumed participants.

Now, taking the binary case for simplicity we know that they only take the one side but sell both ITM and OTM (as well as ATM). I am prepared to bet that they get the most interest OTM because most punters, like me, want odds better than 1/1.

This renders them short a lot of gamma and vega with the sign of the delta (/gamma) probably changing all the time as positions come on and off the book. Lets ignore rho, carry and higher order exposures for the sake of simplicity. We can add them in later if you like.

The biggest issue is obviously the gamma, the vega is not immaterial but will be less volatile and over a period of time the theta will pay them the appropriate (plus markup) price for that anyway. So, lots of gamma, discontinuous payoffs and the Taleb problem as we will call it (infinite gamma around the money close to expiry).

How do they approach it? I couldn't say but at a guess based on what I would do having traded similar structures in a dynamic (no static replication) environment I would do the following:

1) Group aggregate exposures on each market by expiry after netting off matches.

2) Hedge all greeks with tenor over a few days (arbitrarily lets say 3) with a variety of OTC instruments. Implied vol / LIBOR swaps would do the trick for the vega, and the easier gamma (> 3d) can be managed without any problem.

3) The hard part is the short term gamma, my solution would be to try to keep a flat delta with the hedges for positions with >5 minutes to expiry (before the values spin off to infinity) and to wear the risk that remains. Over the medium term this should be normally distributed and therefore a wash plus margin over FV. The randomness in this interval increases according to a function that we could model as time to expiry increases and minimum bet tenor increases.

Who knows, I guess the test of their hedging robustness will be the test of time. If I carry on at this rate and they don't stop me then the empirical evidence will be in favour of robust hedging on their part. According to their 'About Us' the management are former academics, HF guys and traders - I guess they know what they are up to. My credit risk is minimal, I never keep more than a few grand in my account at a time so as far as I'm concerned it is all great!

Robertral, you always have an interesting perspective on these things, as I said before, we should set something up. Hows your programming?

NQR
 
I see they have index bets now for time switch and trend multiplier, huge 30% overround though so they are obviously being cautious, when i was looking last night i saw they had 9% OR on binaries, i thought great, they finally got their 'commission' to a realistic level, but sadly today it is back to nomal.

I did not know the ECB man was talking today so i had a day off and missed that big move, oh well.

Just checked binaries, also 30% OR on those too so it seems they are scared all round, no doubt NQR you will say he has only 3% or something! they probably bumped it up after you made some bets, if so, you need to be stopped! :)
 
I don't see any value in trading with them at the present time,even during the beta stage it was hard,the 20mns lookback was very profitable but they stopped it.Unless i have a crystalball i can't see a good return on my investment untill they reduce the cost of their bets to a reasonable level.
 
Hi Bunny,

What time of day were you looking? I find their odds too high at night but good between about 8am and 10pm GMT. I won't trade with them outside of those hours. Many of the financial bookies (fixed odds, not spreads) close at night, I guess that the markets are too deterministic at night or something so they are only liquid by day.

This is my observation so far.

NQR
 
This was about 12am last night, market was closed so the 9% OR was not tradeable, i think it is just there to draw people in. If you are referring to when the OR was 30% it still is now, just a random bet priced up - 7:10pm GBPUSD binary range :

top 1.9766

current 1.9715

bottom 1.9689

to be outside in 17 hours 72.37 to be inside 59.49


seems to be 28% for a USDCHF binary, most long term bets are just very badly priced, but luckily with the kind of bets i was doing it does not seem to have affected the value much, by that i mean i still am willing to bet at those odds because i see them as undervalued.

Did you catch this euro move today NQR?
 
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Hi Bunny,

Euro move- I caught about 35 points of it on some Time Switches, had a pretty good day, though was caught short GBP/JPY for about 21% of my Euro gains.

Got a quick one on at 5/1 on a rally late in the day which came through nicely. The markets are too flat and the odds too bad to participate now though (8.35 pm).

Their pricing models are very volatile, I get great value sometimes and at others I don't see it. It is looks like they use some sort of risk adjusting algorithm which marks bets up more at some times than others. Financial betting is not the same as trading the markets, you have to watch for good prices as well as good potential moves. It is a different skill but I find it well worth it... :cool:

NQR
 
Interesting thread with lots of insight - a very enjoyable read.

I've opened a virtual account for test purposes.

Over the years I've made quite a bit from Binary Bets but have always found the same thing..... the various companies pick you up on the radar and start delaying your executions / quotes. I'll be watching with interest as to how these guys cope when a few punters start making some big gains. NQR, if you've already made £12k+ off them then they're going to be watching you! I can not see how these guys can hedge their short term stuff, in my opinion its just impossible. I used to chat regularly with one of the guys on the Binary Desk at one of the leading spread bet companies and he said that with certain bets they just couldnt hedge. Most of the spread betting companies just bucket binary bets in the hope that a mixture of bad trading / under funding / size of spread will see them home safely. In my experience you've got to be bloody good to make money on the Binaries even when the spread is as low as 4% odd.

Steve.
 
At the forums on http://oscarwilmott.com there is a lot of 'interesting' posts about hedging, one by user 'BetaExoticBets' may be real, may not be, you decide if it makes sense.

"Without wishing to be deemed to be giving my site a plug, take a look at the (bet) structures at BetsForTraders.com. The site is not live yet (in beta mode) so (Mr. Moderator, Sir) I am not 'selling' anything.

Here you will see Lookbacks, Time Switches, Binary's etc all offered in small size on a range of underlying assets for retail punters. The spreads are a little wide in places (but less so in others) and the hedging presents lots of interesting challenges. My approach is to bucket the greeks in VaR tables by risk tenor and strike. Some positions offset some or all greek exposure for others and some has to be hedged using the underlying or vanillas. Aaron is spot on in saying:

"If you are a market maker in exotic options, you set your spreads high enough to cover your residual risk. You hedge what you can cheaply, then make a choice about the rest."

This is how it is as a market maker in these financial bets. Some risk has a positive expected value and we can afford the loss if it occurs; that risk we keep and are pleased to have. Other risks which 'cluster' into big VaR buckets either constitute too great a risk to the business or, on occasion, have a negative expected value. The latter case occurs most often after a large market move.

In short, the best hedge is having lots of similar risks on both side of the book (One Touch / No touch etc), taking the spread and doing what you can with the rest of the exposure. Great fun... ;-) "

noticced overround is still 30% today, very sad to see, they are making choiceodds look cheap!
 
this is what i was saying before - the whole pricing structure they have seems like a total rip off.

I'm only interested in trading where i see real value and in a direct comparison, this lot are just not offering it.

If anything, the complicated way of displaying the bets is just designed to hide the fact that the value is poor.

still competition is health i suppose :LOL:
 
for forums http://oscarwilmott.com/index.cfm?NoCookies=Yes&forumid=1

quote is from thread http://oscarwilmott.com/messageview.cfm?catid=8&threadid=47087&FTVAR_MSGDBTABLE=

interesting his post has now been removed today, bit of a coincidence since the thread is quite old and i posted the quote on here yesterday, did someone on here complain? ;)

edit

Just realised you may be enquiring about the 'interesting' posts, well it was not an obsevation of any specific thread in particular, just during my browsing over the last 3 weeks i have come across various posts about hedging, all very involved, this is not an interest of mine so i did not fully understand it all, but to someone who is knowledgeable they may find them insightful, I am sorry though I do not have any specific links to these posts.

Today looks like a free money day, unfortunatley i got scared and didn't bet this morning, it would have won though, i don't know why i was scared, i have done 2 bets at long odds and won both, account up just under 50% and that was just with conservative stakes, over the past days i have noticed GBPUSD prices for short term bets have increased by quite a bit, however the euro$ seems to have decreased slightly and is now equal value with USDCHF.

NQR have you been betting a lot on GBPUSD lately?

Bunny
 
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Cant see much to complain about a hedging strategy. Maybe it was a false post and the company didn't like it?

The cable move today has been a treat on my long range positions there so I hope the post is real as it shows they are hedging and can take my hits! :cool:
 
bunny6128 said:
for forums http://oscarwilmott.com/index.cfm?NoCookies=Yes&forumid=1

quote is from thread http://oscarwilmott.com/messageview.cfm?catid=8&threadid=47087&FTVAR_MSGDBTABLE=

interesting his post has now been removed today, bit of a coincidence since the thread is quite old and i posted the quote on here yesterday, did someone on here complain? ;)

edit

Just realised you may be enquiring about the 'interesting' posts, well it was not an obsevation of any specific thread in particular, just during my browsing over the last 3 weeks i have come across various posts about hedging, all very involved, this is not an interest of mine so i did not fully understand it all, but to someone who is knowledgeable they may find them insightful, I am sorry though I do not have any specific links to these posts.

Today looks like a free money day, unfortunatley i got scared and didn't bet this morning, it would have won though, i don't know why i was scared, i have done 2 bets at long odds and won both, account up just under 50% and that was just with conservative stakes, over the past days i have noticed GBPUSD prices for short term bets have increased by quite a bit, however the euro$ seems to have decreased slightly and is now equal value with USDCHF.

NQR have you been betting a lot on GBPUSD lately?

Bunny
Click to expand...




Hi Bunny,

Yep GBP/USD only today - caught a nice chunk of it - albeit at 'news time' odds which are not as good as 'regular time' odds but I guess it's proportionate as I'm still up.

Are you doing well with them? You mention 50% up on your account... is that your BetsForTraders one? What have you been doing?

NQR
 
Bunny,

For whats its worth I just feel that these co's just follow the same predictable path when they enter the market place. At first they promise all the whistles and bells etc but the reality is that they can not financially afford to deliver. The fact is that tight spreads with instant execution on purely math based options models aint ever going to happen. I spoke some time ago with a lead market maker at one of the larger spread betting co's in London and he admitted that the Binary Bet arena was now a much more challenging area of the market place than it had been a few years back. His theory was that initially punters where from a broad spectrum of experienced and unexperienced. This led to many inexperieced punters paying the price and donating large amounts to the companies. After a period of time only more experienced players were left. This was more of a challenge to firms which offered tight spreads. Peoples ability to spot 'value' started to challenge the house edge. The firms also suspected that arbitrage was taking place in some quite large volumes. The upshot is that most of the firms retain an edge which is greater than the price quotes. By that I mean that they manually process orders or delay quotes to clients in order to disrupt certain clients activities or to 'pinch' extra value. All of the firms realise that purely mathematical models are beatable by experienced players in one form of another.

So what you say Bunny is not totally unexpected. I guess that they've already looked at the areas where they are losing most money and then they move the goal posts - in this case changing the minimum time duration of your bets. Chances are that if you keep winning then they move the goal posts again. I agree with you - their pricing is a nonsense with 30% - 50% round turn costs. They'll just keep increasing the spread until the make money.

Steve.
 
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