FTSE 100 - 20 Minutes options
Right before the option enters its last minute before expiry, if its priced high (buy >95 or sell <5) then i enter.
Could this strategy work or is it flawed that one day one spike will lead to a huge loss?
Yes it is flawed, You back a binary at 100. It will expire 0-100, so the bookie can't lose, which means you can't win. Your outcome is either a scratch or the loss of your full stake.
Look at the vig in these short term options. How much is the house advantage, and how do you expect to overcome it?
Well on IG markets. Ussualy the 20min ftse if theres a few minutes to go and its around 95 and i buy and it settles as predicted then i make 5 points profit?
Lets say you are able to buy every time as soon as it goes 95 offered. You win 19 bets out of 20. What is your total profit? Imagine you win 94 times out of 100 - what is your total loss?
Lets say there is a 20 minute binary bet about to expire. It is an "up" bet on the FTSE 100. 2 minutes to expiry, the FTSE is up 8 points. You are offered a price of 95 to place an up bet. If you understand which locations in the market will not reverse down 8 points in 2 minutes, you can clean up with this strategy. However, if you really understood this, you could get better odds elsewhere.
Remember also that the price you are given is essentially a volatility price. Due to the wide spread, you are always overpaying for your volatility. In addition, since the bookies can't hedge these products, the prices may become skewed as they adjust their vols in order to help balance their book. In all cases you will be backing at a worse price than the true odds of the bet, meaning that in the long term you will lose.
