Binary Bets are perhaps the simplest form of spread bets available. Binary Bets are basically a ‘yes’ or ‘no’ as to whether you think a quoted event will occur or not. The event for instance could be whether or not you believe the FTSE 100 will close above a certain quoted price at a specific point in time. Not all spread betting platforms offer Binary Bets, for a list of spread betting companies that accept binary spread bets, check our list at the bottom of this page.
Binary Bets were designed to be simple, and in some cases fast moving. They haven’t always been around though, they were introduced in 2003 as an additional bet type by the originators of spread betting, IG Index. You can find spread betting firms offering Binary Bets for the same markets but over different time periods, right down to every 5 minutes for quick moving bets.
Understanding Binary Bets
Binary Bets are quoted on the likelihood of an event happening, so the price quoted will be between 0 and 100. If the quoted event comes true, the price will be 100 on close. If the quoted event does not materialise, then the quoted price will be 0 on close. Based on the underlying market price and the time left until the best expires will drive this quoted price in either direction. Sudden movements in the underlying market price close to the bet expiry can quickly turn things around. If you chose ‘Yes’ to your binary bet you want the price to close out on 100. If you chose ‘no’, you want it to close out on 0.
Binary Bet Example
Taking an example Binary Bet at IG Index will make things a lot easier to understand:
- You select from their ‘Binary Hourlies‘ and choose ‘FTSE 11:00-12:00‘. From the listed options, you choose for the ‘Hourly FTSE to rise’.
- The bet is yet to start, therefore a starting price of 48 – 52 is quoted. The spread here is 4 points, and this is the 50/50 starting point.
- You agree with the quoted event, and also believe that the FTSE 100 will finish up higher in the given hour.
- You buy at £5 a point.
- The FTSE does rise as predicted, and your bet closes on 100.
- You bought at 52, and it closed at 100. A 48 point movement in your favour x £5 per point equates to a profit of £240.
As with any spread bet, you could have closed the bet at any time. If for instance the quoted price had moved to around 72-76 after half an hour, you could have closed your trade taking a £100 profit.
Where to Place Binary Spread Bets
It is worth noting that unlike usual spread betting, Binary Betting is not regulated by the Financial Service Authority. Instead, in respect of Binary Bets, your chosen spread betting platform will and should be regulated by the Gambling Commission. This is in addition to being regulated for other spread betting activities by the Financial Service Authority. We would never recommend any spread betting companies that were not regulated in such ways.