Binary Bets That Paid Off (and Ones That Didn’t)

An alternative to traditional spread betting is fixed odds binary betting, of the kind offered by BetOnMarkets.

I was first attracted to binary betting due to its tax-free status (like spread betting, it’s classed as gambling rather than investing) and the fact that it is possible to place long and short bets on high-priced commodities and companies at very low risk* using very small stakes.

* I mean low-risk in the absolute sense of how much money you stand to lose, not in the sense of being more likely than not to pay off.

What I wasn’t so keen on was the fact that fixed-odds binary bets work rather like traditional financial options: the instrument you bet on must be the right side of a particular price level on a particular date else you get nothing back. In some cases you can settle your bets early, but I have been frustrated by the inability to do this at times.

Anyway, just over a year ago I placed a number of binary bets with long expiry dates of up to a year. And recently they started to mature and pay out… or not.

A Couple of Binary Bets That Paid Off

My first example hasn’t actually paid out yet, but with only 48 hours to go at the time of writing I think I’m on pretty safe ground. This small bet on short silver will have generated a profit of almost 69% over a year.

This bet was one that I was unable to settle early, but next is an example of another small bet that I did settle early for demonstration purposes the other day — at a profit.

These examples demonstrate that binary betting can and does pay off if you make the right calls.

And now for the bad news…

The bad news is that this year I called it wrong more times than I called it right. The following partial snapshot of my profit table shows that I’ve had my share of losers as well as winners, and if I could show you the whole table you would see that I had put more money into this binary betting account than I can now take out. C’est la vie!

Conclusion

Fixed odds binary betting, of the kind illustrated here, is pretty much an all-or-nothing gamble. Either you win your prospective payout on the expiry date or you lose your stake, with nothing in between unless you are allowed to settle your profitable bets early.

On the plus side, I could not have taken such low-stake / low-risk punts on commodities like oil, gold and silver via traditional spread betting or via any other trading vehicle that I can think off; and if my “gambles” had paid off then the proceeds would have been tax-free! The only problem is… they didn’t all pay off.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.