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Binary Bets

A binary bet is a bet on an event occurring. It could be for "the FTSE to fall", "Wall Street to rise", "£/$ to not move more than 5 ticks by the end of the hour". Either way such events will or will not happen, and binary betting is a popular way to trade them.

People are sometimes intimidated by binary bets but they shouldn't be: a binary price is merely the percentage chance of the event occurring. Or, to be more precise, the financial bookmaker's best bet at the percentage chance of an event occurring. Therefore, if the event you are betting on is "The FTSE to fall more than 20 ticks by the end of the hour" and the price is 33-37 then the bookmaker - ChoiceOdds - is saying that it believes there is a 35% chance of the FTSE falling more than 20 ticks by the end of the hour. Bet according to your view!

Binaries have a two-way price: a buy price and a sell price. If you agree with the bet (or event or proposition) you buy it. If you disagree you sell it.

Importantly, rather than just placing a bet here you a betting PER POINT. So a £1 binary bet is £1 per point - different from a financial fixed odds bet.

If the event occurs (that is, the bet comes true) then the bet settles at 100. If the event doesn't occur (or bet doesn't come true) then the bet settles at 0.

A person's profit or loss is the difference between the closing price and the opening price TIMES THEIR STAKE.

Example:

You buy the "Dax to end down on the day" at 45 for £2 per point. It does settle down and the market makes up at 100.

Your profit is 100 (the closing price) - 45 (the opening price) x £2 = £110.

One of the big differences between placing a binary bet and a financial fixed odds bet is that with binaries you can open AND close the bet before it expires. This is great for taking a profit or cutting a loss.

Example:

You sell the bet "£/$ to end up on the day" at 65 for £5 per point.

During the day there is strong financial data from the States and £/$ comes off. You are now able to buy it back at 15, which you do.

Your profit is 15 (the closing price) - 65 (the opening price) x -£5 (you sold) = £250.

For more information, see About Binary Bets

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