Binary betting sites turn the complex world of financial trading into something simpler where you can still make money off the market, but with your total risk known up front. Many of the largest betting sites and bookmakers have expanded into the online financials betting industry.
Now, you can place real money bets on the stock market, currency pairs and world indices without ever involving an expensive broker.
What distinguishes online binary betting from old-fashioned trading is that you never actually own the underlying asset. All you do is bet on whether stocks, bonds and indices will go up or down in value. The greater the movement, the bigger the return. The most you can ever lose is the value of your original stake.
Basically, binary betting is a way to bet on whether a quoted event will or will not happen. It uses an odds index of 0 to 100 and the bet settles at 100 when that event happens and at 0 when it does not happen. A quoted price between 0 and 100 that reflect the likelihood of the vent happening is set by binary betting sites.
The higher the price, the higher the likelihood of the event happening. For example, a price of 89-91 suggests there is approximately a 90% chance of the event happening. Likewise, a price of 19-21 would suggest an estimated chance of around 20%. You buy in at the current quoted price and then earn a payout if the instrument moves in the direction you predicted.
A common binary bet is on whether the value of a stock exchange such as the FTSE 100 might rise over the course of one day. The quoted price for the bet would be set by the spread. For example, a price of 60-62 suggests that the FTSE is slightly more likely to go up than not. If you believe the FTSE will indeed go up, you would then place a buy bet at the high point of the spread (62). If you believe the FTSE will not go up, you would then place a sell point at the low point of the spread (60).
This bet would settle at 100 if the FTSE did rise and at 0 if it did not. The amount you win or lose would depend on how much you bet. In this case, we could pretend that you wagered £10 per point that the FTSE would rise. If it did, the bet would close at 100 and you would be paid for a movement of 38 points (100-62). Your total return would be £380 (38 x £10 per point).
This might all sound a little complicated but financial betting is really pretty simple. It should all start to make sense when you look at winnings are losses are calculated.
Calculating Binary Bet Wins and Losses
The calculations required to work out how much a bet wins or loses in binary betting are based on the opening price and how much you wagered. The word “calculations” may sound scary, but figuring out how much you stand to win or lose is just a matter of multiplying your bet by the number of points moved.
The following calculations all continue the above example of a betting market on the FTSE 100 rising in a day with the quoted price being 60-62. When placing a binary bet, you have to choose how much you want to bet per point. The below calculations all assume a bet of £5 per point.
Example #1: You choose to bet that the FTSE 100 WILL rise. The quoted price is 60-62 and you place a buy bet at 62, at £5 per point. The FTSE does indeed rise, so your bet is a winner. As the quoted event did happen, the bet is closed at 100. To calculate your winnings, you have to work out the difference between the closing price of the bet (100) and the quoted price at which you placed your bet (62). In this case, the difference is 38 points. You then multiply that difference by your stake per point: £5. 38 x £5 = £190. Your winnings on the bet are £190.00
Example #2: You bet that the FTSE 100 WILL NOT rise, placing a sell bet at 60 and wagering £5 per point. The FTSE 100 does rise so your bet is a loser. The event happened, so the bet is closed at 100. Your losses are the difference between the closing price of the bet (100) and the quoted price at which you placed your bet (60), multiplied by your stake. The difference is 40 points, and 40 x £5 = £200. Your losses on the bet are £200.00
Example #3: You bet that the FTSE WILL rise, but it actually doesn’t. As the event didn’t happen the bet is closed at 0. The difference between the closing price of the bet (0) and quoted price at which you placed your bet (62) is 62 points. 62 x £5 = £310. Your losses on the bet are £310.
Example #4: You bet that the FTSE WILL NOT rise, and it doesn’t. The bet is closed at 0 as the event didn’t happen. The difference between the closing price of the bet (0) and the quoted price at which you placed your bet (60) is 60 points. 60 x £5 = £300. You wining on the bet are £300.
As you can see from the above examples, binary betting is indeed simple. You bet on whether something will or will not happen and you win or lose according to what happens. The 0 – 100 aspect is essentially just a different way of expressing odds. Where binary betting becomes a little more complicated is that you also have the option of making floating binary bets, where you can close your position before the result actually happens.
Closing your Position
Closing your position in binary betting basically means settling your bet early, before the result is known. While the event that you are betting on is taking place, the quoted price offered by can change – this is known as a floating binary. When you have made a floating binary bet, you can close your position at any time based on the updated quoted prices. Again, this might sound a little complicated but becomes clear when you look at some examples. These examples are all based on the same scenarios mentioned above.
Example #1: You place a buy bet on the FTSE 100 rising at the quoted price of 62. Halfway through the day, the FTSE has risen slightly and the quoted price now being offered is 72-74. For whatever reason, you believe there is a chance the market might drop before the day is out and decide to close your position now. You close your bet at the lower point of the spread (72), as you are effectively selling now. This gives a difference of 10 points. 10 x £5 = £50. You have closed your bet for a profit of £50.
Example #2: You place a sell bet on the FTSE 100 rising at the quoted price of 60 and after the FTSE has risen slightly, you decide to cut your losses. With the spread at 72-74, you close your position at the higher point of the spread (74) as you are effectively buying now. There is a difference of 14 points and 14 x £5 = £70. You have closed your position for a loss of £70.
Closing your position in binary betting is basically just a quick way to end the bet and lock in your profit or limit your losses. The option of being able to close your bet early gives you much greater control over your betting and is one of the reasons why binary betting is so popular. If you think you have made a losing bet, then you can get out of it early and cut your losses. On the other hand, if it looks like you have made a winning bet, you can choose to take reduced winnings early in case it starts to go wrong.
Wes Burns has more than a decade’s worth of experience as a writer, researcher, and analyst in the legal online betting industry and is co-founder of OnlineBettingSites.com. Wes approaches his work from the viewpoint of players.