# Binary trading?



## Bobby (4 September 2006)

Anyone use this form of trading ? its betting on financial events for high gain,  in short term.
IG markets offer this.

Temptation is calling me again   

Bob.


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## Magdoran (4 September 2006)

Bobby said:
			
		

> Anyone use this form of trading ? its betting on financial events for high gain,  in short term.
> IG markets offer this.
> 
> Temptation is calling me again
> ...



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:



> IG Markets gives the example:
> 
> A Binary allows you to take a view on whether a specific outcome will or will not occur. For example, will Wall Street close up on the day?
> •	If the answer is 'yes', the Binary settles at 100
> •	If the answer is 'no', the Binary settles at 0



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


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## Bobby (4 September 2006)

Hello ma







			
				Magdoran said:
			
		

> 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
> ...



Greeting Magdoran,

Normally I'll quote part of a post, But your impressive reply needs reposting in full.
Thank you for the depth & articulation of this subject.  

Binary trading may well be just another form of punting, preparation & methodolgy will sure be fun to work on with this one!

As I,m always working on some idea, I'll finish up first on my present research before scrutinizing B.T.

Regards Bob.


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## NettAssets (4 September 2006)

Is the Tax ruling on these sort of trades finalized?

The ATO site still has a ruling from 2003 that is pending and I can't find anything more firm.

It looks as though this is not considered as gambling as the underlying event isn't a sport.has anyone any other interpretations of the law.

It would be nice tax free - but then again at least we can claim our learning curve 
John

Get your tax advice form someone who knows not someone asking!!


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## Bobby (4 September 2006)

NettAssets said:
			
		

> Is the Tax ruling on these sort of trades finalized?



 Hi NettAssets,

No as far as I know.

But don't worry, First make the $bucks then the tax will be  secondary  

Bob.


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## NettAssets (5 September 2006)

Bobby said:
			
		

> Hi NettAssets,
> 
> No as far as I know.
> 
> ...




Paying tax has never worried me Bob, in this situation what worries me is claiming a tax deduction for losses incurred and then being 
hit for the return of deduction and a fine to boot.
Not  that I actually aim to make losses but each new instrument I trade seems to teach me new ways to give the market money - and I havent found out how to teach myself by paper trading.

John


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## Bobby (5 September 2006)

NettAssets said:
			
		

> Paying tax has never worried me Bob, in this situation what worries me is claiming a tax deduction for losses incurred and then being
> hit for the return of deduction and a fine to boot.
> Not  that I actually aim to make losses but each new instrument I trade seems to teach me new ways to give the market money - and I havent found out how to teach myself by paper trading.
> 
> John



Ok John, 
What do you want to know? I'll try to help.

Bob.


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## NettAssets (5 September 2006)

Bobby said:
			
		

> Ok John,
> What do you want to know? I'll try to help.
> 
> Bob.




If I knew what I needed to learn I wouldn't need to be taught it would I.?
But seriously  on this tax front. If the tax office do decide that these instruments are gambling and therefore not assessable, then the purchase of them is not a deduction for a trader and it makes for a very messy BAS if I get it wrong.  I will get a ruling by phone anyway but that will be personal and I wont be able to pass it on.
regards
John


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