Binaries are essentially a trading instrument which at expiry either have no value, or have a maximum point value. The expiry times can be hourly, daily, or weekly. In between these values shift based on the perceived forecast outcome:
http://www.igmarkets.com.au/content/ot_binaries.html
See the link from this page for more detailed examples.
Hello Bob,
I’ve never traded these, and only became aware of these around April this year. I have not read through the terms and conditions of these instruments in sufficient detail to be able to fully evaluate these, so I can only comment on general comments made by a trader I know who was working on some strategies to utilise them.
Personally I rarely day trade as a personal preference, so I have a bias against day trading approaches generally, so please be aware that my comments may be coloured by this perspective.
I do know of some traders that were developing butterfly styled positions looking for the days trading of the underlying to fall within a range to profit from by both buying and selling positions using a strategy with a defined risk. This could use condor variations or other complex spreads to maximise the probability of success, but at the expense of capping profits (and risk of course). You could use a weekly version too of course.
My understanding is that you can buy or sell a binary, and that the value of the binary shifts through the day between 0-100 points based on the perceived chances for the outcome of the instrument. Skews in these values may offer opportunities using complex spreads… Of course some people may elect to use a straight position in a conventional sense, but the outcome is likely to be an all or nothing result, so there are notable risks involved where the outcome may be a 100% loss.
What I would say is to do the due diligence on the instrument, and consider all the risks and spend some time coming up with viable strategies if you choose to go down this path. Personally I tend to shy away from day trading, but if this is the time frame you prefer to operate in, then you may consider looking at credit spread approaches if they are possible, and develop the analytical capability to assess the spreads and locate favourable skews to enter. Of course if you are really confidant in your T/A, you may just want to enter straight positions.
I’d be interested to know if there are some people who are using these, and what their experiences are. Good luck Bob with your investigation, it’ll be interesting to see what you come up with.
Regards
Magdoran