Someone's been reading!
So despite my absence for a while, it has been for good reason. And I used the time well to do some reading up on actually "what" binary options are. Interesting stuff...
According to Wikipedia (the true source of most Journo's real "research" - don't fool yourself), a binary option is: "a type of option where the payoff is either some fixed amount of some asset or nothing at all."
This brings me to my question. Justrade is based on bets of R100. I bet an amount that a stock will close at a certain number, and someone else meets me on the other side to make up the R100, in the pot as it were. We wait and when it is over one of us take some of the money...but what happens to the rest? Surely that is the point of betting, to win your opponents money. Why is the amount won never exactly R100?
Trackback URL for this post:
http://blog.justrade.com/trackback/172
- JustradeLive: U.S. Stocks Inch Lower (saw in @newsfire) http://bit.ly/bgStQ0
- JustradeLive: 3M, Caterpillar Lead U.S. Stock Losses (saw in @newsfire)
- JustradeLive: Beijing looks at severing dollar peg... (saw in @newsfire) http://bit.ly/dw72gG
- JustradeLive: Positive Jobs Report Doesn't Ease Worries of a 'Double Dip'... (saw in @newsfire) http://bit.ly/dqQqAq
- JustradeLive: FDIC taking problem loans by the horns? Related: Banks scramble to raise cash after Fannie Mae c… (saw in @newsfire) http://bit.ly/9JXt7h
Subscribe via Email
Poll
Recent blog posts
IOL business feed
Recent comments
- That blog is neat, thanks
38 weeks 6 days ago - Marc Ashton
40 weeks 3 days ago - Obama and "mis speaks"
44 weeks 2 days ago - Money and the long shot
44 weeks 2 days ago - Ninja Pig!
46 weeks 6 days ago - What I was hoping you would
48 weeks 6 days ago - OK!
50 weeks 2 days ago - What happened to the money?
51 weeks 1 day ago - Response
51 weeks 6 days ago - Help is there if you want it
1 year 1 day ago
What I was hoping you would
What I was hoping you would say is that people who take 4 to 1 bets don't like money. Thus making me feel better and stronger about winning their money. Moving on...
So as per your post, this is actually betting at it's purest form, only cleverly disguised and made accessible to economy minded South Africans. So how many people on the site are actually into betting and how many into economy? Do you think this is a good way/place for gamblers to get their fix?
Money and the long shot
The world loves a long shot (though technically I suppose that would be odds of 10 to 1 or longer)
Those who take those bets JUST love the possible return they get.
OK!
Understood and light has been shed!
Thanks Rory, but now the question is begging to be asked...
"Why would someone take a 1 in 4 chance of winning a bet."
Surely this isn't financially wise? I mean, at a mates bachelors party, betting him that he has a 1 in 4 chance of banging the stripper is worth it just to watch him get shot down (and possible slapped in the face). But with finance instruments?
What happened to the money?
The total amount of the trade is R100.00
So what that means is that say you bid 20 for a contract and trade.
1. You are margined R20, as that is the maximum you can lose.
2. Your counterparty (the person you traded with) is margined R80.00 the maximum they can lose.
So when the trade is closed either you get their R80 OR they get your R20. The total amount in the trade is R100.
Why do we do this? The reason is that it allows all the trades to be easily recognized as a probability. In the case above a trade at 20 gives a probability of 20% that the event will take place.
It does also allow one to calculate the odds relatively easily, odds in the "english" way are payoff to stake. So in the example above the odds are 4 to 1.
Post new comment