What is your opinion on binary options?

[scott_miller]

It's like playing roulette with three-four zeros. It's possible to win for a certain period by using forex knowledge, but it's the timing that gets you in the end with the expirations of the options.

Steer clear.

 

[gkishot]

Help me understand because I might misunderstand binary options.

From Nadex's website:
"Binary options ask a simple yes/no market question. Will the price of gold be above $1700 at 1:30pm?"

My understanding is that you have the choice of buying that the price of gold will be above $1700 at 1:30pm or buying that the price of gold will be below $1700 at 1:30pm. You can either buy something that resembles a call or either buy something that resembles a put.

You aren't allowed to sell the binary option, ie be the house. Am I understanding this correctly?

Yes, you are not allowed to sell short.

 

[Sig]

Help me understand because I might misunderstand binary options.

From Nadex's website:
"Binary options ask a simple yes/no market question. Will the price of gold be above $1700 at 1:30pm?"

My understanding is that you have the choice of buying that the price of gold will be above $1700 at 1:30pm or buying that the price of gold will be below $1700 at 1:30pm. You can either buy something that resembles a call or either buy something that resembles a put.

You aren't allowed to sell the binary option, ie be the house. Am I understanding this correctly?

Not to be a smartass but its binary and you're probably thinking vanilla where there is a difference. There is no difference in binary between selling a call and buying a put.
Nadex has a bid/ask spread and you can offer inside that spread to be the new bid/ask, or you can sell a position you already have into the existing spread. Nearly all the volume is to/from the market makers and there appears to be only two in any given product, so the bid/ask spread is very big, but it is a functioning market. There is also another CFTC regulated exchange in the U.S., cantorexchange, which works the same way. Unfortunately they are just getting started and have even wider spreads, but I can envision a future with 3+ market makers on each platform and the two competing enough to create a competitive market with reasonable spreads.

 

[jonny1lot]

Not to be a smartass but its binary and you're probably thinking vanilla where there is a difference. There is no difference in binary between selling a call and buying a put.
Nadex has a bid/ask spread and you can offer inside that spread to be the new bid/ask, or you can sell a position you already have into the existing spread. Nearly all the volume is to/from the market makers and there appears to be only two in any given product, so the bid/ask spread is very big, but it is a functioning market. There is also another CFTC regulated exchange in the U.S., cantorexchange, which works the same way. Unfortunately they are just getting started and have even wider spreads, but I can envision a future with 3+ market makers on each platform and the two competing enough to create a competitive market with reasonable spreads.

Just tried it out. Man those are wide markets. Great to be a market maker.

 

[zbestoch]

I can envision a future with 3+ market makers on each platform and the two competing enough to create a competitive market with reasonable spreads.

I can as well. And the current spreads on some of the products are not "unbeatable." If one trades his market and there is a product that corresponds to his timeframe, then there is no reason one should not be able to trade binaries and achieve a similarly profitable result.

 

[Lloyd W. Coutee]

Second, no one, no matter how knowledgeable, can consistently predict what a stock or commodity will do within a short time frame. Will AAPL)shares go up or down in the next 10 minutes? Unless there has just been some major announcement from the company, there is no way to even guess at that.

 

[cornix]

Ironically one of my most profitable trading experiences was binary options. But it was:

a) in 2005-2006.

b) Due to those options being mispriced by the broker.

As soon as situation changed, opportunity was gone, too.