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BetsForTraders Interview

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Interview with Joe Paterson, Company Spokesman for BetsForTraders - operated by Trinitas Capital (IOM) Ltd, conducted by Guido, co-editor - Financial-Spread-Betting.com. E-mail Guido for questions or to suggest an interview at traderATfinancial-spread-betting.com

FSB: Hello and thank you for agreeing to be interviewed. By way of an introduction, I'd like you to tell us how you started out in the business?

Joe: Thank you, Guido. I began my financial career in the FX markets as a dealer with a major brokerage house. I've also been fortunate enough to gain significant trading experience in both the FX and stock markets.

FSB: Tell us about the founders behind the site. Who owns Trinitas Capital (IOM) Ltd? Where are your headquarters located? How are you regulated?

Joe: The company was founded by its management team and is owner-managed. Our headquarters are in Douglas on the Isle of Man. We selected the Isle of Man because it has such a strong reputation for player protection, regulation and a solid communications infrastructure. This, combined with the favourable tax regime, made it a natural choice.

We are regulated by the Government's Gambling Control Commission (http://www.gov.im/gambling) which oversees the activity of all betting companies on the Island. Their ethos has client protection at its very heart and imposes sensible rules on our professional conduct.

FSB: Tell us why you decided to plunge into the fixed odds financial betting business.

Joe: The business was originally set up just to offer a single bet type - the Lookback bet. The founders really liked it as a speculative structure and decided to take it mass market. Along the way, they decided to push the barriers and offer a large number of bet types with expiries ranging from as short as 10 minutes to as long as 6 weeks.

The competition in the space is very strong and we have great admiration for those who have gone before us in the industry. Having said that, we are confident that we can provide something new and different - a means for traders to optimise every bet in real-time using our unique 'build-your-own-bet' slidey bar dealing interface. Basically it amounts to a simple way in which clients can design, price and place their own bet - rather than having to take a bet that we offer them.

FSB: Are fixed odds bets the same as binary bets?

Joe: Yes. It's the same product, it is just that the price is presented in a different way in each case. For example, when people quote binary odds they might say that a bet costs 33.33, this means that if you stake that sum you will get a payout of 100 if you are right. In the language of fixed-odds betting, the same risk reward would be quoted as 2-1; you pay a stake of 1 and get 2 back (plus the stake) if you win. Binary betting isn't new, it's just fixed odds betting re-packaged by marketing people. Call it what you will, the proposition is as follows: the trader has a fixed risk (the stake) and can potentially make many times this if the market moves in his favour and has passed his strike price at expiry. The converse side of this is that he can never lose more than his stake if the market moves against him.

At BetsForTraders we quote Binary Bets in all the different odds conventions to suit our global client base. This includes fixed-odds (also known as UK odds), binary odds, European odds and US odds.

FSB: Fixed odds financial bets are often given different terms by different companies - we've seen them referred to as financial bets, fixed odds financial betting, click options, digitals, exotic bets, binary options, box options, fixed rate options, binary bets, one touch, no touch, barrier range...etc. Why so many names for essentially the same product?

Joe: Tell me about it! It is certainly confusing for the novice to see the generic term for fixed risk betting coined in so many ways. This has occurred because there are a number of different companies making a market in these bets now and each have applied their own vernacular. Perhaps we should hold a conference on it, agree to some core vernacular and all stick to it to make life easier for new traders. Guido, knowing so many people in the industry as you do you would be well placed to instigate this.

Having once been confused about the terms myself I will attempt to clarify...

Firstly, the term 'financial bets' is used in two contexts: financial spread betting and the type of fixed-risk bets that are offered at BetsForTraders. It is an all-encompassing term for any kind of financial speculation, really.

Next, the following terms all have the same meaning from a practical perspective: 'fixed odds financial betting', 'click options', 'digitals', 'binary options' and 'binary bets'. These terms refer to the bet type that we at BetsForTraders call the Binary Bet. This bet type pays the trader a fixed amount if the market is above (for an up bet) or below (for a down bet) the trader's strike price at the time of expiry.

The terms 'One Touch Bet', 'Not Touch Bet', 'Ranges'...etc. all relate to different bet types that we offer. For example, the One Touch bet pays the trader as soon as the market hits his strike price. This differs from the Binary Bet which pays out if the market is past the strike when the bet expires. It's a very neat product because you get paid out as soon as the market touches the level that you say it will; this is obviously a more probable event than it being above or below the strike price at expiry.

The 'Range' bets are a little different. BetsForTraders offer a lot of different types of range bets. A popular example is the One Touch Range in which the trader gets paid if the market ever touches either a strike price above or below the current market level. Equally popular is the Time Switch range which pays the trader a fixed amount for every time period (every hour, for example) that the market ends up within a range that he sets. Some traders find that these are far easier to profit from than the more popular 'directional' bets.

When you throw all of these different bet types, plus the others we offer, together, we call the collection of bets 'Exotic Bets'. The term is used because we think that such a diverse range of specialist bets for traders, all quoted in real time, is a fairly exotic concept.

Anyway, Exotic Bets is easier to say than a more descriptive name like, 'bunch of real-time bets that traders can design themselves to create the pay-off profile of their choice from a vast range of possibilities and markets', which somehow fails to roll off the tongue!

FSB: For someone located in the UK, what advantages do exotic financial bets have over other trading vehicles such as spread betting. How do they compare?

Joe: The betting services offered at BetsForTraders.com have several key advantages. For one thing, under current legislation, all betting profits are tax free. So, compared to trading the underlying markets, if your tax rate is 40%, you are that much better off when betting on every pound you make. That really adds up.

Spread betting also offers this benefit but not the same limited risk and high potential return that you can get at BetsForTraders. Risk and return are everything to traders and when you have a large, leveraged risk exposure, as is the case in spread betting, you'd better know what you're doing. If the market moves fast against you, there is the potential to owe the broker more than your stake. The bets in which we make a market, however, are different - you can never lose more than your stake but you can multiply your money by up to 2,000% in just minutes.

I am an active spread-better and think that the providers in the market do a great job but I've been trading for some years now and still occasionally get a nasty sting. For guaranteed limited risk, high-payout potential and tax free gains under the prevailing laws, you can't beat the services we offer in the fixed-odds financial betting market.

FSB: How is fixed-odds financial betting commonly used? For hedging or speculation?

Joe: Good question. We see both taking place. Mainly, it is speculators who have a view about the market: they come on the site, take a look at the charts and design their bet accordingly. The guys who are making large profits with us are obviously these speculators.

Most of them trade just a few of the bet types offered, find their sweet spot and stick to it on the 'if it ain't broke, don't fix it' principle. Many of them start off small, just betting £20, £50 or £100 at a time and then scale up as they improve.

A notable exception to this was a very clever chap who explained to us on the phone what he was using the bets for. In short, he combined spread bets with One Touch bets to create a really neat pay-off profile. I'll demonstrate with an example:

The market is trading at 10,000 and he goes long with a spread bet through his spread betting brokers (not us, we don't offer spread bets yet...). He is long £10 per point and has a stop loss on the spread bet at 9,500. He then places a bunch of One Touch bets with us at his stop level of 9,500 to pay out a total of £5,000 if the market touches that level in the next few weeks.

With this strategy, he now knows that if the market rises, he will keep winning £10 per point from his spread bet but if it falls out of bed, then he will make back on the One Touch what he loses on the spread bet.

The strategy is not perfect as the One Touch cost him a small stake which he will lose if he profits on the spread bet and the market could fall but not by enough for the One Touch to pay out before it expires. Still, he claims to be doing very well with it. As I said, he is an unusual candidate as he really wants to lose his bets with us because they are just hedges. He aims to make his profit on the spread betting side.

Most of our clients come to the site with the aim to make profits and many do very well at it.

FSB: Has the BetsForTraders.com platform been developed in-house? How easy is it to use in practice?

Joe: The software was written in-house by a group of active traders who wanted to create the ultimate in flexibility. We set about with a goal of letting clients quite literally design their own bet and then price and track it in real time. BetsForTraders is the culmination of that goal and we are very proud of it.

The site couldn't be easier to use. You really have to see the 'slidey bar' system to understand it but it is very intuitive. Because we let you design and price it yourself, rather than offer a range of bets and then display prices that you can take for them, we needed a system like this.

Most of our clients have no background in the financial markets and find that it is a great place to learn on a limited risk basis with a straightforward interface. The combination of transparency and liquidity that the system offers is often cited as an attractive feature by clients.

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