Binaries
Dellboy
Binaries are simple "yes/no" instruments on financial market movements - effectively fixed odds bets on where the market will finish today (eg "will it finish up today?", "will it finish up 10-20 points today?" etc). It's difficult to explain them properly, but if you prowl around on the home page of one of the well known SB companies you should find a full explanation (I'd rather not name-check any firms).
There's no way of hedging them, as there exist no futures markets with the same (bizarre) pricing dynamics. The bookie controls his price by adjusting the vol that drives the model; if he sees a load of clients trading in the same direction he will try to balance his book using a steadily more inappropriate vol. A bright client could potentially trade the resulting inaccurate prices and, in the long run, make money. Be warned, though, that the discrete, "all or nothing" pay-outs make it a hell of a rocky ride - even if done perfectly you'd see many significant losses alongside a fractionally greater number of significant profits. Very much a product for the risk-hungry...
Only one company offers them at the moment (but others will doubtless follow).
Dellboy
Binaries are simple "yes/no" instruments on financial market movements - effectively fixed odds bets on where the market will finish today (eg "will it finish up today?", "will it finish up 10-20 points today?" etc). It's difficult to explain them properly, but if you prowl around on the home page of one of the well known SB companies you should find a full explanation (I'd rather not name-check any firms).
There's no way of hedging them, as there exist no futures markets with the same (bizarre) pricing dynamics. The bookie controls his price by adjusting the vol that drives the model; if he sees a load of clients trading in the same direction he will try to balance his book using a steadily more inappropriate vol. A bright client could potentially trade the resulting inaccurate prices and, in the long run, make money. Be warned, though, that the discrete, "all or nothing" pay-outs make it a hell of a rocky ride - even if done perfectly you'd see many significant losses alongside a fractionally greater number of significant profits. Very much a product for the risk-hungry...
Only one company offers them at the moment (but others will doubtless follow).
I didn't expect this thread to get so interesting.
Well done all contributors it has certainly open my eyes to a few things that will help me to increase my profits.
No need to try and overcome bias anymore as judging by the comments it is like chasing the wind.
What is very nice however, is when you are on the right side of the bias- like I have been quite a few times- and can make quite a nice profit before the markets even open!
Well done all contributors it has certainly open my eyes to a few things that will help me to increase my profits.
No need to try and overcome bias anymore as judging by the comments it is like chasing the wind.
What is very nice however, is when you are on the right side of the bias- like I have been quite a few times- and can make quite a nice profit before the markets even open!
sidinuk
yep, you'd always want to avoid a simulated stop because not only might it get lost in the heat of battle, but simulated stops also mean that as it is done as a stop limit order, if the market goes through the limit, the stop is then reissued and this is how IB does it, which means you could chase the market all the way down
always get a stop on at the exchange, and if the exchange wont accept a stop, go for a a stop limit, use that instead of a simulated stop, but use as wide a limit as the exchange will allow, i think IB only use a 2pt limit on the S&P for example, so a stop limit held on Globex is way preferable to IBs simulated stop
yep, you'd always want to avoid a simulated stop because not only might it get lost in the heat of battle, but simulated stops also mean that as it is done as a stop limit order, if the market goes through the limit, the stop is then reissued and this is how IB does it, which means you could chase the market all the way down
always get a stop on at the exchange, and if the exchange wont accept a stop, go for a a stop limit, use that instead of a simulated stop, but use as wide a limit as the exchange will allow, i think IB only use a 2pt limit on the S&P for example, so a stop limit held on Globex is way preferable to IBs simulated stop
TheBramble
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Probookie - Goldmine Info!!!
First of all a thanks to Probokkie for being so candid with his/her info. Seems like the interest generated might call for a new thread - or ven a forum. Just a thought.
Anyhow, a couple of points.
1. Why would/do SBs reject arb bets? You mention that after a honeymoon period, the arbs tend to find one leg of their arb gets rejected. Can't be just sour grapes that a punter is making money? And if the SB is offerring the spread, why would they care if the punter is arbing?
2. Apart from binaries and house prices, almost everything esle is hedgeable. In the users guide from my SB they state that they are 'quite happy' when we punters win because that means they make too - on the hedge. Clearly though, the SB doesn't always hedge and presumably 'takes a position' on their clients positions, as it were. So, on what basis does an SB decide to hedge and simply take the spread - or get adventurous and fo for the lot by not hedging? Is this down tot he individual SB traders? I assumes most of the on-line trades don't go through actual traders screen (unless they're of a 'useful' size).
First of all a thanks to Probokkie for being so candid with his/her info. Seems like the interest generated might call for a new thread - or ven a forum. Just a thought.
Anyhow, a couple of points.
1. Why would/do SBs reject arb bets? You mention that after a honeymoon period, the arbs tend to find one leg of their arb gets rejected. Can't be just sour grapes that a punter is making money? And if the SB is offerring the spread, why would they care if the punter is arbing?
2. Apart from binaries and house prices, almost everything esle is hedgeable. In the users guide from my SB they state that they are 'quite happy' when we punters win because that means they make too - on the hedge. Clearly though, the SB doesn't always hedge and presumably 'takes a position' on their clients positions, as it were. So, on what basis does an SB decide to hedge and simply take the spread - or get adventurous and fo for the lot by not hedging? Is this down tot he individual SB traders? I assumes most of the on-line trades don't go through actual traders screen (unless they're of a 'useful' size).
The Beyonder
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I've since closed my SB account as I found some of the quotes ridiculous compared to the actual price but this is turning into a very interesting thread.
Many thanks to Probookie for sharing some insights.
I would like to ask two points to you please:
1. I appreciate you probably can't speak for all SB firms but what is the policy on hedging. Is it done or not? I ask because when I opened an SB a/c (won't say which) I went to a presentation there, and he gave the distinct impression that it was done. In fact he said that it didn't matter whether the punter won or lost as their SB co. would still make money. "We're not like a high-street bookies who dislike big wins" he said giving the impression they hedge.
A few months ago there was a TV program featuring the same SB co. From that you could see they didn't hedge as some days they did quite badly (this was during the volatile times of the war).
So I'd like to know if it is done or not.
2. Referring specifically to US shares, why do some spreads widen suddenly and dramatically to $1 or more when the underlying share sprice has a spread of only a few cents. This is what finally did it for me, making trading these shares pointless. Is it done to shake out people. Cynical me sees no other reason.
I appreciate you may have to tread carefully with your answers but your thoughts would be appreciated.
Best regards
The B
Many thanks to Probookie for sharing some insights.
I would like to ask two points to you please:
1. I appreciate you probably can't speak for all SB firms but what is the policy on hedging. Is it done or not? I ask because when I opened an SB a/c (won't say which) I went to a presentation there, and he gave the distinct impression that it was done. In fact he said that it didn't matter whether the punter won or lost as their SB co. would still make money. "We're not like a high-street bookies who dislike big wins" he said giving the impression they hedge.
A few months ago there was a TV program featuring the same SB co. From that you could see they didn't hedge as some days they did quite badly (this was during the volatile times of the war).
So I'd like to know if it is done or not.
2. Referring specifically to US shares, why do some spreads widen suddenly and dramatically to $1 or more when the underlying share sprice has a spread of only a few cents. This is what finally did it for me, making trading these shares pointless. Is it done to shake out people. Cynical me sees no other reason.
I appreciate you may have to tread carefully with your answers but your thoughts would be appreciated.
Best regards
The B
The Beyonder
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Didn't mean to duplicate TheBramble's Q2, was busy typing my own.
bramble
everyone hates to be arbed because it means someone is saying that they have got their pricing wrong and the arber is on a free meal ticket - people dont mind you earning your bucks - but no one wants the other guy to get the meal for free - but the fact is that arbing even in electronic markets doing automated trades needs a lot of skill in both finding the arb and getting size into the trade - and its real easy to get into the open of an arb - but taking the trade where you can get in at a scratch for sure and hopefully out for a profit is the key - i guess a lot of folks may have made money arbing the spreadbettors - but in the end most will get burned by raising the anti right on the one they cant close out on the other side just as the market turns against them
spreadbettors may occasionally try to make a few more bucks by not hedging - but i bet (what odds!) that they lose more than they win for the simple reason that spreadbetting companies have spreadbetting operations skill, but not trading skills and trading outright positions is a whole different ball game to just taking the spread off the poor (ultimately) punter
everyone hates to be arbed because it means someone is saying that they have got their pricing wrong and the arber is on a free meal ticket - people dont mind you earning your bucks - but no one wants the other guy to get the meal for free - but the fact is that arbing even in electronic markets doing automated trades needs a lot of skill in both finding the arb and getting size into the trade - and its real easy to get into the open of an arb - but taking the trade where you can get in at a scratch for sure and hopefully out for a profit is the key - i guess a lot of folks may have made money arbing the spreadbettors - but in the end most will get burned by raising the anti right on the one they cant close out on the other side just as the market turns against them
spreadbettors may occasionally try to make a few more bucks by not hedging - but i bet (what odds!) that they lose more than they win for the simple reason that spreadbetting companies have spreadbetting operations skill, but not trading skills and trading outright positions is a whole different ball game to just taking the spread off the poor (ultimately) punter
sidinuk
hey man, sounds like you know what you are doing - but you really want to stay away from the dow, unless you are trading the stops, but even then you will never get any size on - so its a mission to no where unless you are a market maker for it - now where's that rglenn gone!
hey man, sounds like you know what you are doing - but you really want to stay away from the dow, unless you are trading the stops, but even then you will never get any size on - so its a mission to no where unless you are a market maker for it - now where's that rglenn gone!
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the beyonder
its to do with the hedging algorythm for whoever is providing the price against the underlying stock looking at price and size available
you really need to hold the position if you understand what has caused the spread to widen on the derviative - but you need to cut and run when u see the underlying ask or bid move against u as well
its to do with the hedging algorythm for whoever is providing the price against the underlying stock looking at price and size available
you really need to hold the position if you understand what has caused the spread to widen on the derviative - but you need to cut and run when u see the underlying ask or bid move against u as well
stevet,
YM is getting a lot more liquid now. In fact today I entered 2 contracts on both YM and ES at similar times and got no slippage on YM but lost .25 on ES!
Admittedly the market is absolutely dead at the moment, so we'll have to wait and see what it's like when volatility increases again.
What do you trade Stevet?
YM is getting a lot more liquid now. In fact today I entered 2 contracts on both YM and ES at similar times and got no slippage on YM but lost .25 on ES!
Admittedly the market is absolutely dead at the moment, so we'll have to wait and see what it's like when volatility increases again.
What do you trade Stevet?
TheBramble
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The Beyonder said:
We're obviously both talking about IG TheB.
Don't know about Q2 - you've almost nicked my handle too! (Or did I almost nick yours...?)
sidinuk
i think you will find the u just lost a bit on the es as the dow is strong today and supporting the es, plenty of buying in the big stocks and plenty of selling in the nas dragging the es back- which is why u got slippage in the es - but i bet the es bounced back a second later - the nas is trying to spoil the party at the moment and the dow is coming out with all the good tracks to keep the party going and the poor old es does not know which way to turn!
as they say - we are at quite a key point here and u cant trust lunchtime levels - but when the gang get back from lunch - a break though the lunchtime range should provide some good moves -assuming they bother to come back from lunch - in which case we will have to stick with some safe scalps
i guess my point with size is that if u want to trade 25+ which u will one day, the dow is not gonna be in the race, so not a lot of point of putting up with the any pain now - better to stick with the es and nas - get to know them like the back of your hand, and then start putting those orders in in 100s!
ps = this market action normally indicates that the market is gonna roll over and die - and everyone i speak with tells me its going up - never trade against fools with money - but watch for them to run scared!
i think you will find the u just lost a bit on the es as the dow is strong today and supporting the es, plenty of buying in the big stocks and plenty of selling in the nas dragging the es back- which is why u got slippage in the es - but i bet the es bounced back a second later - the nas is trying to spoil the party at the moment and the dow is coming out with all the good tracks to keep the party going and the poor old es does not know which way to turn!
as they say - we are at quite a key point here and u cant trust lunchtime levels - but when the gang get back from lunch - a break though the lunchtime range should provide some good moves -assuming they bother to come back from lunch - in which case we will have to stick with some safe scalps
i guess my point with size is that if u want to trade 25+ which u will one day, the dow is not gonna be in the race, so not a lot of point of putting up with the any pain now - better to stick with the es and nas - get to know them like the back of your hand, and then start putting those orders in in 100s!
ps = this market action normally indicates that the market is gonna roll over and die - and everyone i speak with tells me its going up - never trade against fools with money - but watch for them to run scared!
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Trader333
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The Beyonder,
A possible explaination for why some spreads become so wide on US shares can be seen on the attached screenshot. Note that the spread is only 7 points but look how many shares are being shown as being available up to and including the bid of $20.03 to the ask of $20.63 It is only 2000 on the ask and 1900 on the bid so a total of 3900. If someone took all of those in a couple of trades then the spread would be 98 points.
A SB company would then be exposed to any arbitrager that came along if their spread did not factor this into their equation. So by widening the spread beyond those 3900 shares it gives them protection and I would guess (although I admit I dont actually know), that for US shares the level II screen is being watched as much by the SB companies as anyone else.
Paul
A possible explaination for why some spreads become so wide on US shares can be seen on the attached screenshot. Note that the spread is only 7 points but look how many shares are being shown as being available up to and including the bid of $20.03 to the ask of $20.63 It is only 2000 on the ask and 1900 on the bid so a total of 3900. If someone took all of those in a couple of trades then the spread would be 98 points.
A SB company would then be exposed to any arbitrager that came along if their spread did not factor this into their equation. So by widening the spread beyond those 3900 shares it gives them protection and I would guess (although I admit I dont actually know), that for US shares the level II screen is being watched as much by the SB companies as anyone else.
Paul
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Trader333
u got it - no size so they widen the spread to protect iin case they need a hedge - but if size comes back = their spread comes back - must be great fun trading stocks with spreadbetting companies - just like options !
u can imagine in the begining the spreadbetting companies did get taken on level 2 - but i am sure they have built this into their computer systems now
u got it - no size so they widen the spread to protect iin case they need a hedge - but if size comes back = their spread comes back - must be great fun trading stocks with spreadbetting companies - just like options !
u can imagine in the begining the spreadbetting companies did get taken on level 2 - but i am sure they have built this into their computer systems now
probookie ,
* But I'm not a trader. I prefer receiving spread to paying it 🙂 *
I think this is such an obvious statement that it leads some to think that you may be a pisstaker. After , who doesn't want to make easy money , but of course not everyone can be a bookie.
Also , as you well know there are major downsides - like the constant grovelling to your bosses and the constant politicking amongst yourselves . but then again no such thing as a free lunch 😉
by the way , which SB do you work for ? or is this some big
* secret * . I used to be a sub contractor for finspreads .
stevet,
At a cusory level I don't see anything in your long winded post that contradicts mine except that you are wrong if you think SB firms only make their money from the spread .
Most of their trades are UNHEDGED and they hope/want clients to lose since guess who would be the benificiaries .
SB firms are far from the fair dealers that they like to potray , many dodgy trades go unanswered . Just because I say it is their game don't mean it is right , it is the fault of the corrupt and inept regulators that SBs can get away with murder .
How do I know ? I have worked within the industry , been in a legal dispute with one and I SB regular .
Then again you don't .
* But I'm not a trader. I prefer receiving spread to paying it 🙂 *
I think this is such an obvious statement that it leads some to think that you may be a pisstaker. After , who doesn't want to make easy money , but of course not everyone can be a bookie.
Also , as you well know there are major downsides - like the constant grovelling to your bosses and the constant politicking amongst yourselves . but then again no such thing as a free lunch 😉
by the way , which SB do you work for ? or is this some big
* secret * . I used to be a sub contractor for finspreads .
stevet,
At a cusory level I don't see anything in your long winded post that contradicts mine except that you are wrong if you think SB firms only make their money from the spread .
Most of their trades are UNHEDGED and they hope/want clients to lose since guess who would be the benificiaries .
SB firms are far from the fair dealers that they like to potray , many dodgy trades go unanswered . Just because I say it is their game don't mean it is right , it is the fault of the corrupt and inept regulators that SBs can get away with murder .
How do I know ? I have worked within the industry , been in a legal dispute with one and I SB regular .
Then again you don't .
CM Not sure what the obvious reasons might be, but in fairness to Probookie I thought he did say who he worked for when he posted a rebuttal to one of Mma's recent accusations. So no "secret" there.
However I see that the censor toned down the accusation and deleted the rebuttal.
ps "he"or "she" as the case may be as you pointed out .
However I see that the censor toned down the accusation and deleted the rebuttal.
ps "he"or "she" as the case may be as you pointed out .
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delboy trotter
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mma,
I don't know what your on mate, but when you sober up, have another read at this thread!
dbt
I don't know what your on mate, but when you sober up, have another read at this thread!
dbt
