Binary Options

[damon_achey]

Quote from RedEyeFly:

True in terms of payoff, but in terms of probability, they should be the same, assuming some days before expiration, no?

Probabilities if held through expiration yes. But the binaries can/will trade very differently before that.

 

[SomeYoungGuy]

I check the prices all the time. I like being able to just look at a number and say Oh, there's a 60% the S&P will be above 1100 in a month and a half, or a 20% chance it will be under 900 in three months.

If I ever find those probabilities to be out of whack, they are going to be very easy to arb.

 

[byteme]

Before Taleb re-branded himself as a philosopher and his ego was still a manageable size, he wrote a pretty good book that covered some of the pricing issues of binary and other exotic options:

Dynamic Hedging

More recently, there has been a flurry of binary betting/binary options books over the last few years. A quick search on Amazon will reveal.