Example of a Binary BetThe following example shows how you can use binary bets to make short-term profits on a financial market. FTSE to finish upIt is 4.17pm, and the FTSE currently stands 11.6 points lower than the previous afternoon's official closing level. But you think a rally is likely before the end of the day, and see that our price on the market finishing up is 6.6 - 9.2. You decide to 'buy' the FTSE to Finish Up binary for £10 at 9.2. At this point you know your maximum potential loss: if you are wrong and the binary bet scores 0 you will lose 9.2 x £10 = £92. You also know that your maximum return on the bet will be (100 - 9.2) x £10 = £908. Eight minutes later, the FTSE has risen quickly to be 2.4 up on the day, and our quote for the FTSE to Finish Up binary has risen by over 50 points to 58.8 - 61.8. You think there may be some more market shifts to come, and decide to take your profit now. You close out your bet at our current 'sell' price of 58.8. Your profit on the bet is: Profit
You were right to be concerned, as the FTSE returns to negative territory in the final minutes of trading, closing 6 points down. And our FTSE to Finish Up bet scores 0. The good news is that by closing your bet early you have guaranteed yourself a healthy profit, instead of the loss that you would have suffered if you'd left the bet alone. |
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