That's amazing! - fixed price spreadbetting.

[ukoptions]

Following good posting etiquette, I reviewed previous threads, but still can't get over how amazing this idea is!

Sorry to gush - this was my first encounter with the concept of "fixed odds betting" at the IX Conference at Olympia today.

It blew me away!

You tell the system how much you want to make, trading which instrument, and it tells you the price of the bet, and that's all you pay.

If things work out your way in the time-frame you specify, you cash in the profit target amount to your account; if the market goes the other way, you've ALREADY paid the total amount you owe them.

No more sleepless nights, worrying about a gap break tomorrow morning in the wrong direction - surely this has got to be a better way to trade?

I make that a question because I've only known about this phenomenon for 6 hours, and am by no way expert in the drawbacks of this type of trading.

But it does seem (at first glance) to exhibit similarly attractive features to those of options, where the up-front total cost is known, is small, and the profit potential from getting it right remains fairly powerful.

The people at IX were from www.betonmarkets.co.uk and the platform interface looked neat and effective.

Anybody else similarly knocked out about a trading system that is integrally designed to avoid worry - you know the full cost of the trade when you place the bet - and that's all you pay, no matter how far the market moves against you - incredible!

Certainly going to have some fun with the demo account - hang on a minute! Do I need to bother with a demo account when a real bet will be for a pre-determined, pre-paid amount that won't increase - so I might as well start by betting for real, as the usual hesitation caused by fears of a potentially escalating debt, just don't exist here.

Tell me I'm not being stupid - that is truly amazing, isn't it?

Anybody want to point out any important drawbacks that I'm missing?

(Sorry - I still can't get over how clever it is to design a trading system that works like this - it seems to intrinsically lay to rest the biggest fears that a trader can face).

Looking forward to hearing the other side from you seasoned traders.

Incidentally IX is great - its great the way they've pulled so many interesting trading and investing products together in one place - well done!

 

[hornblower]

How long have you been working for them?

 

[ukoptions]

You old cynic! Young Hornblower.

How long have you been working for them?

Honestly, I'm just an ordinary Joe who has never come across this principle in the trading world.

I had come to think exclusively "inside-the-box" - that all brokerage houses would offer their products on the understanding that guaranteed stops would only be provided on a restricted range of instruments and would cost more.

So my whole conception of trading was that it was intrinsically a high-risk, fearful activity that people only indulged in because catastrophic moves were rare - but as Mandelbrot points out in the "(mis)behaviour of markets" they are more common in actuality than a normal distribution would suggest.

As you can see by my handle (ukoptions), I was originally in love with the idea of profitting from the concept of options - i.e. that the investor would pay a small sum to be admitted to the game, and if he was right, his rewards would be magnified magnificently.

But most importantly, if he got it wrong, he knew in advance what he would lose.

I thought this concept was exclusively restricted to options - that was why I was so amazed to find an apparently similarly excellent profit mechanism alive in another context - in a place (spreadbetting) where it seemed totally alien to the death-defying, high-risk, high-roller image of that particular instrument.

No this is genuine enthusiasm - I think the guy demonstrating the system to me was somewhat taken aback by my keen reaction on encountering a "pre-pay" method of trading (like a pre-paid mobile phone, if you like).

You don't think the principle of knowing your total debt for a trade up-front is a neat idea?

 

[Pat494]

I have just had a look at the said website
The theoretical bet is this:-
I want to win £10
they are offering £10 if the Wall St. index is higher than 11524 on 19 May 2006
great except it is going to cost me £6.59 to lay the bet !!!
If I win I get £10 - £6.59 = £3.41 NOT £10
Not much of a bet methinks
Sorry no good

 

[hornblower]

ukoptions
you never said how long you had worked for them !!

 

[ukoptions]

ukoptions
you never said how long you had worked for them !!

Ordinary Joe's like me aren't employed by betonmarkets, they just go to Olympia, get enthused, and then, thanks to veteran members, realise that being a newbie is no excuse for getting excited by the novelty of a fixed-risk trading instrument.

And what is the Old Man of the Sea's answer to my earlier question:
"You don't think the principle of knowing your total debt for a trade up-front is a neat idea?"

 

[hornblower]

When things seem to good to be true
then they usually are !!

 

[ukoptions]

So why read any threads?

When things seem to good to be true
then they usually are !!

As you know, I'm a Rookie.

I'm not trying to be nasty, but honestly I can't see why someone who feels the way you do would bother to read and respond to threads on discussion boards like these, if you believe that anything that appears to be profitable probably isn't.

If someone says they think they've come up with a novel method, or a lower risk way of trading, do you always dismiss it out-of-hand?

If this is true, and you are perfectly entitled to adopt this stance, then what can you gain from reading threads?

This is an honest enquiry - I'm not trying to be funny.

As you know, I'm a newbie, so please explain what IS to be gained from reading these threads if someone mentions something that seems too good to be true?

Should we only take seriously posters who say "I usually only make 0.15% each month and this is how I do it" - we should only take seriously people who more frequently lose money or who only make tiny profits?

Isn't that the inescapable conclusion of your stance?

Please, help a newbie understand.

 

[Vaco]

I have just had a look at the said website
The theoretical bet is this:-
I want to win £10
they are offering £10 if the Wall St. index is higher than 11524 on 19 May 2006
great except it is going to cost me £6.59 to lay the bet !!!
If I win I get £10 - £6.59 = £3.41 NOT £10
Not much of a bet methinks
Sorry no good

this was the explanation, if you dont understand it u shouldnt be trading, but then as u keep telling us ur just an average joe

Now be a good rookie and tell us how amazing this type of trading is oh and dont forget to mention those nice people that put on th show at olympia

 

[rog1111]

You'll find that your odds are superior trading options

rog1111

 

[Greed Is Good]

Anybody want to point out any important drawbacks that I'm missing?

No-one knows which way the markets are heading with 100% certainty. Many times pros & seasoned novices can do well as they have a rough idea/gut reaction on direction & or have strong technical analysis skills and it works out for them but any trader will over time have some major loses.

That is certain & unavoidable.

Read all of these threads for the same old Q&As then paper trade for 4-6 months. When/if you feel that your paper trading results are acceptable to you then that is the time to use real money but even then you will find that when it is your own money your trading decisions will be influenced by this factor alone .

Any company can make something look good on paper. Real world/real money trading scenarios are different/complex.

 

[ukoptions]

51% return before May is out?

I have just had a look at the said website
The theoretical bet is this:-
I want to win £10
they are offering £10 if the Wall St. index is higher than 11524 on 19 May 2006
great except it is going to cost me £6.59 to lay the bet !!!
If I win I get £10 - £6.59 = £3.41 NOT £10
Not much of a bet methinks
Sorry no good

Isn't a £3 return on a £6 bet a 50% return?

Savings accounts are paying 4% if you leave it in for a whole year - not half a month.

And all in a few days with NO RISK of being charged more than the original stake.

I can't see what's wrong with that.

Please explain why these figures prove that a sensible investor would not play this game; it worries me that I can't see what's wrong with this risk/reward ratio over this very short time-frame.

Please advise.

 

[ukoptions]

See posting #12 + press "reply"

this was the explanation, if you dont understand it u shouldnt be trading, but then as u keep telling us ur just an average joe

Now be a good rookie and tell us how amazing this type of trading is oh and dont forget to mention those nice people that put on th show at olympia

I'd be really grateful if you would read posting #12 in this thread and press the "Reply" button and tell me why this proves I shouldn't be trading.

You don't help Rookie's by saying "if you don't know you shouldn't be trading" - you help Rookies by explaining what you believe they have failed to understand.

Please think about being generous with your superior knowledge, by helping those who can't see things as clearly as you do, otherwise your post appears to be a put-down to those who are keen to learn.

Posting #12 awaits your comment, and your response will be carefully considered.

 

[ERA]

Isn't a £3 return on a £6 bet a 50% return?

Savings accounts are paying 4% if you leave it in for a whole year - not half a month.

And all in a few days with NO RISK of being charged more than the original stake.

I can't see what's wrong with that.

Please explain why these figures prove that a sensible investor would not play this game; it worries me that I can't see what's wrong with this risk/reward ratio over this very short time-frame.

Please advise.

ukoptions,

Have you tried opening a virtual acc with them, put a bet and as soon as its on see what you can sell it back at , you will be amazed at how much value its lost, just like the old story of the new car driven off the show room floor loses a chunk of value instantaneously, it's much the same.

Try it and see how you go and all the best to you, but I think Roger1111 comments are correct option in an open market place are a superior play.

 

[fat chance]

Hi ukoptions,

I had a look at the betonmarkets site (but I didn't join and maybe it's different if you are a member). It seems that they do not quote live prices for both sides of the bet that everyone can see. This means that if you want to close out your position to take a profit or cut your losses, then they can look at your position and move the price for your personal quote against you. They even want to know how much you want to bet so they can tell whether you are closing out or reversing your position. Actually for the bets I looked at, it seems that they keep the price of the bet constant and can vary the strike price, but it basically has the same effect I think and could give them a big advantage over you.

 

[Baldwreck]

Hi ukoptions - if its of any help I have been "trading" on betonmarkets for over 3 years now with varying degrees of success - I agree with the posts above that betonmarkets is expensive but compared to traditional options there is a far greater range of expiry dates, which to the best of my knowlege no other provider operates. I know that most on these boards seem to regard the likes of betonmarkets as pretty mickey mouse affairs but their offer suits me. Just by way of illustration I took out a bet on the morning of 24th April that the DAX would finish higher than 6094 at close today. The bet cost £26.65 and if succesful will win £60 so net profit of £33.35. The helpful part to me of fixed odds is that it doesn't matter what happens to the market in between. Indeed last Wednesday with the DAX at 5962 my bet was worthless but here we are a few days later and barring a late sell-off I should be OK. I know its just buttons at this stage but I remain in acceptable profit and in effect I'm using betonmarkets money rather than my own.

Hope this helps

 

[Pat494]

Isn't a £3 return on a £6 bet a 50% return?

Savings accounts are paying 4% if you leave it in for a whole year - not half a month.

And all in a few days with NO RISK of being charged more than the original stake.

I can't see what's wrong with that.

Please explain why these figures prove that a sensible investor would not play this game; it worries me that I can't see what's wrong with this risk/reward ratio over this very short time-frame.

Please advise.

Perhaps consider the following story. There's you are a bit down on your luck - in fact all you have left in the world is £10 in coins. It comes on to rain so you head for the shelter of the arches. You plonk yourself down on a bench. Sitting on the bench is an elderly gent. you get chatting. And what a coincidence he is miserable he is down to his last £10 million. He holds out a handful of coins. Once a gambling man always a gambling man. The old gent says how about a bet ? OK you say. He says he will toss one of the coins and if it comes up heads you pay him £6.50 and if it comes up tails he pays you £3.50. What a great deal you say - one even knows the odds etc. Hang on a second a voice in the background ( thats me ) is heard to say -that is hardly fair. True he says and that sunshine is why I have £10 million and you have only £10.

 

[Baldwreck]

Perhaps consider the following story. There's you are a bit down on your luck - in fact all you have left in the world is £10 in coins. It comes on to rain so you head for the shelter of the arches. You plonk yourself down on a bench. Sitting on the bench is an elderly gent. you get chatting. And what a coincidence he is miserable he is down to his last £10 million. He holds out a handful of coins. Once a gambling man always a gambling man. The old gent says how about a bet ? OK you say. He says he will toss one of the coins and if it comes up heads you pay him £6.50 and if it comes up tails he pays you £3.50. Hang on a second you say that is hardly fair. True he says and that sunshine is why I have £10 million and you have only £10.

Yes P494 that surely hits the nail on the head - unless you think (can measure) the probability of the bet succeeding exceeds the expected return then you don't bet. Isn't that what options pricing is all about?

 

[BinarySoft Chris]

Yes P494 that surely hits the nail on the head - unless you think (can measure) the probability of the bet succeeding exceeds the expected return then you don't bet. Isn't that what options pricing is all about?

baldwreck, isn't that what every form of betting is about?

 

[Baldwreck]

baldwreck, isn't that what every form of betting is about?

Absolutely jules101

Back to the thread!. The price of the bet (win £10 if DOW is higher than 11524 at close on 19th May) has now moved (DOW at 11618) to £7.45. So you would win £2.55 a return of 34%. Alternatively, for bears if you think that it will finish at less than 11524 the price is currently £3.67, a gain of £6.33 if you are right. Which way would you bet or do you think they are both too expensive?

The only DOW bet I have on at present is to win $40 if DOW finishes above 11416 on 16th May. For that I paid $20.51 when DOW was at 11389.1. So at the moment that bet looks quite tasty although its current resale value is only $32.80.

My own view is that this form of fixed odds betting is well suited to those with modest bank balances.