For those with a bit more experience of the markets, Finspreads has recently added binary bets to its online spread betting platform. These are win-lose propositions that allow traders to take a view as to whether a market will finish a session up or down. Clients can bet whether the FTSE or the Dow will end a given day or even a specific hour higher or lower. Today we have the pleasure of interviewing Angus Campbell, Head of Sales and Marketing desk at Finspreads:
Financial-Spread-Betting: Mr. Campbell, please tell us a little about yourself.
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Angus: Angus Campbell, started 3 yrs as a dealer then moved to Head of Sales and Marketing desk.
Financial-Spread-Betting: Ok to start, so when did Finspreads open its doors to binary betting?
Angus: August 2005.
Financial-Spread-Betting: Tell us about the owners and principals of Finspreads.
Angus: Finspreads was launched 19th April 1999. In Feb 2001 launched the FIRST fully interactive online spread betting platform. In may 2002 IFX group PLC purchased Finspreads, IFX is fully listed on the LSE and is authorized and regulated by the FSA. In November 2003 launched new look online platform. In November 2004 an advanced order system was launched.
Finspreads philosophy is to become a client driven retail spread betting platform, with a fully interactive website and an emphasis on client training and support to "bring out the professional trader in you".
Financial-Spread-Betting: Tell us why you decided to plunge into the binary betting business?
Angus: To create volatility in otherwise un-volatile markets and to be able to offer a wider range of products.
Financial-Spread-Betting: Binary betting are just one type of a new generation of options, called exotic options, that has emerged in the last 5-10 years. Could you give us an overview of Finspreads exotic options? How do they work? How does Binary Betting differ from fixed odds and spread betting?
Angus: Binaries are an exciting product as you will always know your downside since you know your potential losses and profits as and when you open a position. A binary market is made between 0 (the event not happening) and 100 (the event happening). For example, we have a binary bet on whether ABC plc share price (400p) will close up or down on the day. If it closes up the Binary mkt will close at 100 and down at 0. The market is titled "ABC PLC up on the day" At the opening of the day the market will trade at 48 - 52 (which means it's 50/50 as to the outcome) you'd buy @ 52 if you agree that it will end up on the day or sell at 48 you disagree. The day progresses and ABC announce some good news which rallies the share price upwards and therefore the market settles at 100. If you bought at 52 your bet will close out at 100 which will give you a return of (100-52) = 48 x your stake. If you had sold at 48, disagreeing with the market then you'd have lost (100-48) = 52 x your stake.
With a spread bet you only get the movement of the share value, i.e 400p to 410p you are in theory, liable to all 400 pence times your stake, should the market crash, though there are many sophisticated tools that Finspreads supplies that can limit your potential losses on spread betting. Binaries, unlike fixed odds are easy to enter and exit whenever you want.
Financial-Spread-Betting: Could you walk us through Finspreads binaries? Which markets do you cover?
Angus: Currently we offer only 4 binary markets: FTSE and Wall Street up and down on the day and hourly markets.
Financial-Spread-Betting: To whom do you think will binary betting on Finspreads appeal most?
Angus: Clients who like to know their potential risk and their reward. Also when markets are trading flat, binaries spice up the market volatility and therefore offering opportunity in otherwise flat markets.
Financial-Spread-Betting: What has been the clients' reaction?
Angus: Very good with a huge increase in the number of bets we are taking per day.
Financial-Spread-Betting: What kind of bets are available to trade? Do you plan on expanding your product range in the future to include more exotic binaries such as double no-touch and double touch?
Angus: Yes we will be.
Financial-Spread-Betting: Could you give us some insight about how a binary bet is priced? How are you able to price/offer forex options with such short term "target" time frames? Do you use the Black and Scholes model for pricing bets? Do you use formulas to price bets?
Angus: The fundamental principal of pricing model used is Black and Scholes, but there are many more parameters used so it's not as simple as you'd think!
Financial-Spread-Betting: What uses do binary bets have? Please explain with examples.
Angus:They provide volatility in flat markets and limited risk the moment you trade.
Financial-Spread-Betting: What dealing platform do you use? Is it proprietary? What would you say really stands out about it?
Angus:Our own platform. We guarantee our dealing prices, so do not knock people back once they've clicked on buy or sell. You can also add place limit orders as well.
Financial-Spread-Betting: Is it possible to time the markets? Or is it really too random especially over very short periods of time?
Angus:No, it is too random.
Financial-Spread-Betting: What potential leverage is possible?
Angus: Binaries are not leveraged.
Financial-Spread-Betting: What is the minimum deposit and minimum/maximum bet amounts (if there are any)? In which base currencies can clients trade binaries?
Angus: 50 pence to £150 only available on line. Clients can trade in €, $, CHF, PLZ.
Financial-Spread-Betting: Do you accept deposits by BACS? Which other payment methods do you accept? Do you offer credit facilities? Can accounts be overdrawn?
Angus: Cheques, BACS, Debit cards - NO cash NO credit cards. Clients can apply for a credit account though.
Financial-Spread-Betting: Do you offer a demo account facility?
Angus: No, we do not offer a demo account. We offer an 8 week training course called The Trading Academy, this allows the client to trade at a 1p a point for the duration of the 8 weeks. It also supplies you with a free in-depth training manual. All bets are paid for by the clients own funds. This process we find allows our clients to embrace risk rather than trade unrealistic stake sizes that they would never do when coming to start for real.
Financial-Spread-Betting: Do you offer limit and take profit orders for picking profits/entering binaries? If not, do you plan to offer them sometime in the future?
Angus: We offer limit orders on binaries, but no stop losses.
Financial-Spread-Betting: Do you accept International clients?
Angus: Yes we do (but not American - unless they are domiciled in the UK).
Financial-Spread-Betting: Are gains/winnings taxable?
Angus: No, as they are classified as a bet!
Financial-Spread-Betting: Will you stop clients who are day-trading effectively? No. We have encountered traders who have worked hard to develop systems that were consistently profitable only to find that the platform broker (not Finspreads) abruptly changed the rules thus killing their trading systems or worse barred the users. Please comment.
Angus: We at Finspreads hedge our positions and therefore we like winning clients. As long as they are not abusing the system and trading on clearly incorrect prices to give them an unfair advantage we welcome winning clients with open arms. A winning client is a happy client and we hope that then continue to trade with us for the long-term.
Financial-Spread-Betting: Under which jurisdiction and license is Finspreads offering binary betting? Do you have a bookmaker's license?
Angus: Under UK law. Yes.
Financial-Spread-Betting: Do you operate any other sites besides www.finspreads.com?
Angus: IFX Markets is our parent company. We also offer CFDs on miniCFDs.com.
Financial-Spread-Betting: How big is your client base? How do you make most of your money?
Angus: We have over 25000 clients on our database. Through the volume of trades and our spread.
Financial-Spread-Betting: Is Finspreads profitable?
Angus: Yes, for both our client base and the company as a whole.
Financial-Spread-Betting: Who is predominantly making up your customer base at this time?
Angus: Our client base is made up primarily retail investors. They range from the complete beginner to sophisticated investors. We also have some institutional clients as well, such as hedge funds etc.
Financial-Spread-Betting: As of now, what trends do you see in the markets people choose to trade? Are there certain markets that clients seem to prefer? Do you think this will change over time?
Angus: Popular markets are: indicies (primarily Dow and FTSE) commodities, (oil mostly) and currency markets. We also see a huge amount of business in shares. We traded the equivalent of over 1 billion shares last year alone!
Financial-Spread-Betting: Do you trade on a personal basis? Have you made any mistakes along the way that you have learned from? If so, would you describe them?
Angus: Finspreads staff are not allowed to trade as implemented by our compliance department.
Financial-Spread-Betting: Are there traders who make a living through trading at Finspreads? What is the trading style and methods that these traders use for winning consistently?
Angus: There are plenty of clients who are making a living through trading with us and their strategies range from day trading to trend trading.
Financial-Spread-Betting: The last few years has seen an explosion in spread betting, cfds and more recently binary betting. Do you think it could spell the end of traditional share trading? And is the stock market feeling the pinch?
Angus: No, it will not spell the end of share trading as there are still 7.5 million share traders out there and at the best only 300k spread betters/binary betters. As it is a leveraged product it is riskier. There are still bad connotations regarding the industry due to the fact that it is classified as a bet, but then it wouldn't be tax free! People are gradually coming round to the idea and realizing that they get exactly the same exposure through SBs as you do with traditional stock brokers. The market can only do one of 2 things - go up or down, so whether you do it through us or a normal broker, you get the same result.
Financial-Spread-Betting: There are many sayings in the markets; do you have a favourite one?
Angus: If you find your self itching to get in the market it is often time to stay out. This can lead to irrational decisions and cost you.
Financial-Spread-Betting: How do you see yourselves conquering the binary betting market? What else are you offering as products and services that puts you a bit ahead of your competition?
Angus: By offering great markets supported with a strong client support network. We guarantee our prices, "the price you see is the price you get".
Financial-Spread-Betting: Do you organize any training seminars or meetings which our readers could attend?
Angus: Regularly, see the "learn to trade section" on our website.
Financial-Spread-Betting: What challenges do you see ahead?
Angus: Staying fresh and optimistic. Keeping our clients happy and trusting of us, offering innovative markets that create excitement, constantly improving our spread betting and binary betting platform, and our service to stay ahead of the competition.
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