Binary Options
Binary options are gaining traction with retail brokers. The product is easy for the average Joe to understand. Has anyone seen these sites? Are they even legal? I imagine a security based on publicly traded stock must be governed by the SEC?
http://www.startoptions.com/options/
http://www.anyoption.com/jsp/index.jsf?s=2&gclid=C...
The site works by you selecting if the price in exactly one hour will be above or below the current price.
They are really a rip off. The pricing is really bad. Payouts are around 70%, for both a bear or bull trade. Obviously in a perfectly fair market without transaction costs there should be offsetting payouts on either end. i.e. if payout for above a given price is 70% return then the payout below the price should be 130%. The sites are acting as the market maker I guess, and making killing.
The other ethical issue is they advertise "make 70% in an hour!" but they forget to mention "lose 100% in an hour."
Wow, I never saw this before.
Wow, I never saw this before. Crazy. I have no idea, FX makes sense because its unregulated, but I would figure the equity based options would be regulated by SEC and commodities by CFTC... anyone know what's up with this?
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Couple of things 1) this is
Couple of things
1) this is a beautiful scam. They give u a 70% return if ur right and 10% "refund" if ur wrong.
in other words, a 70% return for a correct guess and 90% loss for a wrong outcome.
You can do a nice little simulation in excel. In about 10-20 trades, the poor sucker is always at $ On a $1000 investment lol.
(here try it, pretty cool)
Instructions:
1) Enter 1000 into Cell A1
2) Enter this formula into cell B2
=ROUND(RAND(),0)
2)Enter this formula into cell A2:
=IF(B2=0,A1*(0.1),A1*1.7)
3) Copy Cell A2 and B2 down till about A20 and B20
Here are some results:
1000
1700 1
2890 1
289 0
28.9 0
49.13 1
83.521 1
141.9857 1
241.37569 1
24.137569 0
2.4137569 0
4.10338673 1
6.975757441 1
11.85878765 1
20.159939 1
2.0159939 0
0.20159939 0
I was down to $0.20 in about 17 trades lmao!!!
I don't argue that this is a
I don't argue that this is a losing proposition but does your excel calculation account for the fact that some people may have reason to believe that they are more than 50% likely to be right? Albeit, not much over 50% given what can happen over a one hour time frame. What if market makers start using these trades and then dump huge blocks on the market to drive the price down? There must be a maximum bet size.
cheese86 wrote: I don't argue
I don't argue that this is a losing proposition but does your excel calculation account for the fact that some people may have reason to believe that they are more than 50% likely to be right?
For the scenario creditderivates gave (70% return, 10% refund), you actually have to be right more than 56.25% of the time. If you're a trader for a BB or HF, wouldn't you be right more than that usually?
Keep in mind that (as far as
Keep in mind that (as far as I can tell) these are daily... so you not only have to be right about direction, but about the direction within 6-8 hours max.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
The key is time frame, I've
The key is time frame, I've never seen hedge fund clients use digitals for a few hours, much less At-The-Money digitals expiring in a few hours.
Most frequently, you'll see digitals employed for 2-week to 3-month time frames, further out of the money, because then our sell-side desk can harp on the fact that the purchaser can obtain a payout 8.5 times the cost (based on the parameters).
So no, I can safely argue that hedge funds do not use digitals to bet on being right in a few hours, digitals are ill-advised for such a short horizon.
unqwertyfied, it doesn't quite work like that.
Example:
70% profit on wins
90% loss on losses
Here's a simulation where i was right 4 times out of 5 (80% correct) and still lost money:
Start with $1000.
First trade: Win----------Balance: $1700
Second trade: Loss----Balance: $170
Third Trade: Win--------Balance: $289
Fourth Trade: Win------Balance: $491.3
Fifth Trade: Win---------Balance: $835.21
Revsly, lol can u stop
Revsly, lol can u stop beating me to the punch??
But yeah the key is definitely time frame! And given the payout conditions, you have to be right well in excess of 80% of the time to be right in this particular scam
Cheese86, that is a concern
Cheese86, that is a concern even without this scam. On any exotics desk, there is always concern that after a hedge fund enters into a barrier exotic (such as this), there is a fear that they may attempt to go into the market and smash the bid to trigger the option in their favour, Revsly can probably testify to this.
It's really quite cool, you'll see market makers and hedge funds battling in the market place in defense or attack of a given barrier. (just ask the traders who are heavily short volgamma/vanna)
And no, as i indicated above, under these circumstances, you have to be right much much more than 50% time, just to break even. Approaching 90%. And remember when you try to move a price in your favour that often, and given the size needed to do that, other players can burn you quite easily.
Not to mention the cost of pushing a price (because in this case, you are acting as market taker, not market maker)
creditderivatives
Revsly, lol can u stop beating me to the punch??
But yeah the key is definitely time frame! And given the payout conditions, you have to be right well in excess of 80% of the time to be right in this particular scam
Haha sorry man, at least we are in agreement!
Another thing to keep in mind is bankroll. Sure the associated win probability with an expected value of zero might be 56% (I'm assuming you calculated it correctly), but since the individual investor likely has a small or at least rather limited funding, the actual probability you'd have to be correct is much higher.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Yeah, unqwertyfied is off a
Yeah, unqwertyfied is off a bit in his calculation. I'm running it too and I'm generating a histogram here. I can't even break even when I've been right 85% of the time.... it's awful!
But just looking at it would tell you: in your head, change the 90% loss to 99% loss and you realize that ANYTIME you are wrong, you're essentially bankrupt. All gains you ever made were wiped out.
One must be correct near 90% of the time to break even in this case
Ah, fair enough. I was
Ah, fair enough. I was assuming that all bets were the roughly the same size (probably not a good assumption I realized), and so calculated % hit-rate to break even {0.7x + 0.9(1-x) = 0}.
This almost seems like blackjack with a large rake and small refund to keep you coming back...haha
unqwertyfied wrote: Ah, fair
Ah, fair enough. I was assuming that all bets were the roughly the same size (probably not a good assumption I realized), and so calculated % hit-rate to break even {0.7x + 0.9(1-x) = 0}.
This almost seems like blackjack with a large rake and small refund to keep you coming back...haha
Agreed, and like at a Casino, its limited equity vs relatively unlimited. Survival is not likely for the player.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
FXTrader wrote: Yeah,
Yeah, unqwertyfied is off a bit in his calculation. I'm running it too and I'm generating a histogram here. I can't even break even when I've been right 85% of the time.... it's awful!
But just looking at it would tell you: in your head, change the 90% loss to 99% loss and you realize that ANYTIME you are wrong, you're essentially bankrupt. All gains you ever made were wiped out.
One must be correct near 90% of the time to break even in this case
The reason you're losing so much is because this program reinvests the whole sum back in a binary option.
Assuming you lose even once, you would need to win the next 4.34 times to break even.
Keep in mind max account open
Keep in mind max account open is $5000, max bet size is $500 and min is $30. So once equity dips below $30 you're done. I've been playing around with it a little.
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
not to defend this stuff, but
not to defend this stuff, but the simulations you guys are building are biased...you assume that the investor (gambler) only has as much money they wagered the first time and will always wager the entire amount they have...
Yup, I did that just to
just ran a simulation for 20
FXTrader--I agree with your
CD was talking about 80% of
So I created a kind of
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Just to provide some
Revsly, that makes perfect
http://www.mediafire.com/file
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
To be fair, the expected
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Yeah, furthermore, the fact
The problem with binary
lol it's not that "big" of a
creditderivatives wrote: lol
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
creditderivatives
First things first, this is
Well, this gives me something
Still not sure if I want to spend the next 30+ years grinding away in corporate finance and the WSO dream chase or look to have enough passive income to live simply and work minimally.
Wouldn't these be exploitable
balbasur wrote: Wouldn't
Work hard, play hard.
IlliniProgrammer
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Anyone want to touch on the
BCbanker wrote: Anyone want
Work hard, play hard.
Acknowledgements first:
PM me for questions you dont
Good on you, CD. That was
Thanks for posting this. The
this is a test
BCbanker wrote: Anyone want
Just saying, this thread
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"I just want to be a monkey of average intelligence who wears a suit. I'll go to business school!"
mctrader, I'm not clear on
I think you can out play
http://www.wallstreetoasis.co
I've never sat on a desk, I
I'd be happy to read some of
Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
-30 Rock
Revsly wrote: I'd be happy to
Good, let me describe my