Binary code for gamblers in a hurry

Binary betting is increasingly popular among short-term traders looking to punt on an actual result rather than the scale of the result.

The key difference between binary betting and spread betting is that, like in fixed-odds betting, the maximum profits and losses are known at the outset.

This is because the binary market settles at 100 if the event occurs and at zero if it does not.

A bet on the FTSE 100 index could work like this: A bookie offers a binary bet of 55-60.

If the Footsie closes up on the day, the binary settles at 100; if it closes down, the binary settles at zero.

A punter "buying" at 60 at £5 a point would win £200 if the Footsie closes up (100 minus 60 is 40, multiplied by £5 is £200) and lose £300 if it closes down (60 minus 0 multiplied by £5).

Someone "selling" at 55 would make £275 if it closes down and lose £225 if it closes up.

Tony Cross, spokesman for IGIndex, said: "Binaries can be seen as a cross between financial spread betting and fixed-odds betting. They're by definition designed for the shorterterm trader, typically expiring at the end of the trading day."

Like other forms of betting, binary prices are updated throughout the day so punters can close a trade before expiry to realise profits or limit losses.

If you have bought the Footsie at 60 and it is up by early afternoon, the price may have moved from 55-60 to 80-82. Closing the bet then would lock in profits of £100 — 80 minus 60 multiplied by £5. A punter who sold at 55 could limit losses in a rising market in a similar way.

"Think of it this way, it's like having the leading horse at the half way point in the Grand National but with a binary you have the option to collect your winnings then. They wouldn't be as big as if you waited until the horse won the race, But it would secure winnings now rather than worry if it'll keep that lead until the end of the race," said Cross.

There are many different styles of binary bets, the main ones being: The "up" bet — if the market closes up the bet settles at 100, if down it settles at zero.

The "down" bet — if the market closes lower the bet settles at 100, if higher, at zero.

These can be done on an hourly, daily or weekly basis, and profits and losses can be taken at any time.

Bookies also offer special binary bets which work in the same way in that you bet on an event happening and if it does the bet settles at 100, if it doesn't it settles at zero.

Specials include: One touch — will the market move through a certain level.

Tunnel — the market has to stay within a certain high-low range.

Hi-Lo — will today's high or low be a given distance from yesterday's close.

Ladders — will the market be above a certain price at a certain time of the day.

Extreme short bets — five and 20-minute bets on the Footsie and Wall Street are incredibly volatile.

Binaries can move quickly so bets are placed online rather than by telephone. There is no commission as the spread-betting firms make their money from the size of the bidoffer spread.

SOME POSSIBLE OPPORTUNITIES

IG Index is offering the following spreads in the binary market*:

FTSE 100 to be above 5723.65 by the end of the week 59-65 FTSE 100 to be above 5760 by the end of the week 48-55 FTSE 100 to be above 5820 by the end of the week 30-35 Dow Jones to above 11,400 by the end of the week 18-22 The pound to touch $1.550 by the end of the week 64-76 Tory majority and FTSE 100 up more than 100 on May 7 11-17 Hung Parliament and FTSE 100 down more than 100 14-20 Labour majority and FTSE 100 up on May 7 2-4 *Prices subject to change