Best Thread Binaries vs CFDs, Warrants, Spreadbetting, Options, etc.

[telcobert]

I am sure it is possible to pick holes in the above argument, but for me its about risk control.

Hey Baldwreck,

The analysis seems quite valid. With your specific trades (congratulations) you got more than double the profits with binaries with not even half the exposure of a spreadbet. (Though the CAC netted 80p less, when I checked, this does not change the result.)

Thus, Binaries may offer a 4-times better deal in terms of exposure ... in this specific example, at least. Q: Does this hold up over many trades?

Also, I accept that risk control is an advantage of binaries. Your $93,51 was your max exposure, and the max potential winnings were even $116,50 - given that you leaned out a bit with a bullish view.

However, I still find it doubtful to put that in direct relation to the spreadbet. Prices could have just risen steadily from 21Jun to 4Jul and your exposure thus nil (ignoring spread) for the implied $40 winning - or they could have tanked and increased your exposure dramatically. And obviously - at least in theory - there is unlimited potential winnings with a spreadbet. Still, any relation is probably best done with actual winnings (as you did).

Fundamentally, your analysis (max. exposure vs. actual winnings) could be a very good indication of the risk management side if you were to take long term binary averages with the corresponding implied spreadbet exposure averages from the intermediate lows.

Now before I start building a Monte Carlo ... is there any number you can throw in from your collection of life trading data?

Last: This may also be the starting point to see how the spread would affect those terrifying 13 % round-trip cost of Steve ...

Bert

 

[Baldwreck]

Bert - sorry for delay in replying - have been on hols - in line with my relaxed style of playing the markets!! Need to digest your question a bit more before answering - will get back to you soonest

 

[Baldwreck]

Bert
You are quite right of course - spread betting offers an unlimited upside BUT only if you are prepared to ride an unlimited downside.

You are also right in that prices might rise continously from the time the bet is made thus with a spread bet the exposure in those circumstances is very small; but the same is true of an in the money fixed odds bet.

Let me know what stats you think you could use to create a workable monte carlo scenario to compare the two approaches.

You may be interested to know that I have done some back testing using my entry and exit points from which I concluded that my "system" could be succesfully converted to spread betting but only if there were no stops - any level of stop reduced profitability dramatically.

I suspect the final answer to the conundrum lies in style and size of wallet. If you are willing to accept a higher level of risk and have a bigger wallet then I would expect spread betting to be the better option - for those who (and accepting it is a risky business) are more risk adverse then I believe fixed odds,binaries or digitals, whatever you want to call them, are a better bet (weak! sorry no pun intended).

 

[telcobert]

I concluded that my "system" could be succesfully converted to spread betting but only if there were no stops - any level of stop reduced profitability dramatically.

This result of yours should not surprise us: With bucket shops it is the barrier which ultimately makes them profitable (most of the time).

On the monte Carlo: I will be lazy for now and just assume that on the average, you need probably half the capital with binaries than with spreadbets...

 

[Lord Flasheart]

For me this has to be the most interesting thread Ive read.The fact that only 9 people have responding to the pole shows that the majority of people dont use binaries,this is backed up by less thread traffic in general.I know a few traders who struggle to understand how they work and look no further. I beleive most binary traders come from a spreadbetting or gambling background which is why the product was introduced. Ive struggled for years to make futures pay mainly due to my indiscipline. Many of the problems i had have been overcome using binaries in the last couple of months.Binaries can be used much better for mathmatical system trading. My trades are over 60% accurate and my target is to make £150-200 per day.Using extrabet and binarybet I can afford to be wrong more often than right and still make the required amount. I use small stakes as low as £25 on extrabet and £pp on binarybet. using a simple stake increase system I am making my target with little risk. Staking plans in theory always have zero expectancy but not if your over 50% right and so far I have won virtually everyday and my biggest bet has been £10pp which was because I felt sure about the trade. These opportunities cannot be found in futures or spreadbetting. Many traders have huge accounts and still only average that amount. Love the product

 

[BinarySoft Chris]

Perhaps binary traders don't respond to polls

 

[BinarySoft Chris]

Also I just noticed that the poll is closed, perhaps the poll was only open for a short period?

 

[Lord Flasheart]

That might explain it, but it does seem to be the same people on the threads

 

[telcobert]

Perhaps binary traders don't respond to polls

Good one, Jules. Or maybe binary traders did not respond, as there were more than two answers ... :cheesy:

Bert

 

[Baldwreck]

Julian - I'm with you on this one - for a "laugh" I had a (paper) £1 a point long bet on the Dow August futures with TradeIndex. My stop was at 13133. Yesterday I was stopped out at 13089 yet the lowest intraday of the cash market was 13204. This seems to me like a complete lottery, which is why I will stick with digitals.

 

[telcobert]

Yesterday I was stopped out at 13089 yet the lowest intraday of the cash market was 13204. This seems to me like a complete lottery, which is why I will stick with digitals.

Sounds more like a "completely crook" than a "complete lottery" to me. I know they can say that's their quote but at the same time its like handing them the knive to stab you - knowing your position and stop-order points and all ...

 

[telcobert]

...a history lesson would be a valid contribution to the thread - not my intention to be overly critical. I just think far more of the driving force in derivatives in those days was sales rather than customer centric.

Now would you really say anything has changed today, GammaJammer? Retail derivatives is still sales driven, or isn't it?

 

[Lord Flasheart]

can you explain exactly ehat hap;pened baldwreck as it seems insual, all prices are linked to the futures markets. Did you phone them up

 

[Baldwreck]

can you explain exactly ehat hap;pened baldwreck as it seems insual, all prices are linked to the futures markets. Did you phone them up

Julian - no, I didn't call them - it was only a virtual trade - had it been real it might have done so - but I just wonder whether it was that unusual - I think what one learns is that the futures pricing can be significantly more volatile than the underlying market. Hence I'm happy to stay with the certainty of fixed -odds. Have to say I'm taking a beating in this market but hat is only to be expected from time to time.

 

[telcobert]

it was only a virtual trade

Well, that was important information which should have been given in the original post ... so I take back what I said and concluded. Unless somebody can report a real example of the same stop-loss move by a CFD-firm, of course.

Bert

 

[Baldwreck]

Well, that was important information which should have been given in the original post ... so I take back what I said and concluded. Unless somebody can report a real example of the same stop-loss move by a CFD-firm, of course.

Bert

Bert - well I did call it a paper trade in the original post - is that not the same thing as a virtual trade? - that aside what I am illustrating is the uncertainty in the comparison between fixed odds/digital/binary betting and spread betting - clearly with spread betting one would have much more difficulty in limiting risk on each trade because of both the uncertainty of the level at which the stop actually gets triggered and the vagaries of the futures market.

 

[telcobert]

I did call it a paper trade in the original post.

Guess you are right, sorry. Just didn't click.

Also agree that the argument about Stop-Loss should be valid anyway. However Jules in some other thread just wrote sthg about setting stop-losses even in a binary market (?) ... appears at odds with the conclusions from our thread. Let's see why he argues that S/L may still be relevant.

Bert

 

[Baldwreck]

Guess you are right, sorry. Just didn't click.

Also agree that the argument about Stop-Loss should be valid anyway. However Jules in some other thread just wrote sthg about setting stop-losses even in a binary market (?) ... appears at odds with the conclusions from our thread. Let's see why he argues that S/L may still be relevant.

Bert

No probs Bert - I saw your exchange with Jules on the other thread - Not sure how other binary/digital providers work but BOM allow you to put stops in either by level of underlying market or by value of bet - as mentioned previously - I find that to be a very expensive from of money managment - I believe one is just better off in the first place betting smaller amounts.

 

[BinarySoft Chris]

No probs Bert - I saw your exchange with Jules on the other thread - Not sure how other binary/digital providers work but BOM allow you to put stops in either by level of underlying market or by value of bet - as mentioned previously - I find that to be a very expensive from of money managment - I believe one is just better off in the first place betting smaller amounts.

Stop losses may well be an expensive form of money management with financial bookmakers as they bias their prices and spreads continously. They would also know the level of your stop loss, and as binary betting isn't FSA regulated they could in theory introduce sudden spikes in their quotes in order to trigger stop losses.

However, on betting exchanges such as Betfair I think stop losses are a very useful tool, especially when you are monitoring lots of fast-moving markets within the same application. Also, Betfair is completely anonymous so no-one else will know your stop loss price, so trading on betting exchanges is probably less vulnerable to spikes in the market triggering stop losses.

 

[Baldwreck]

Jules - I get the picture - as a matter of interest how many markets are you following on a continuos basis? - my style is definitley in the "place the bet and forget it" camp - no screen watching for me!