Those financial traders and investors who have added binary options to their portfolios may have noticed that another similar form of financial speculation also exists: binary betting.
This article will examine the difference between binary betting and binary options trading so that traders can understand which form of speculating on the financial markets may be the best for them in various situations.
Binary betting is a kind of financial betting that allows a trader to speculate on whether or not a specific movement in the value of an underlying asset will occur or not by a predetermined time and rewards the trader with a fixed payout if the movement does occur and nothing if it does not occur. In that sense, a binary bet is a fixed payout, all-or-nothing financial instrument.
Binary bets are typically offered on the following financial assets: stock index averages, stock share prices, forex rates, commodity prices – much like binary options.
Types of Binary Bets
- Rise/Fall – Bet pays out if the asset’s value is higher or lower than a predetermined rate at the bet’s end time.
- Higher/Lower – Bet pays out if your asset is higher or lower than the asset value when the bet is made at the bet’s end time.
- Touch/No Touch – Bet pays out if the asset’s value reaches/does not reach a predetermined value at any point before the bet’s end time.
- In/Out – Bet pays out if the asset’s value is within/without a certain range of predetermined values at any point before the bet’s end time.
Binary Betting Payouts
Binary bets typically pay out anywhere from 50% to 100% of the investment amount. The payout depends on the odds of the event occurring that one is wagering on and can thus fluctuate widely.
Binary Bet Entry/Exit Times
Binary bets can be made at any time when the markets are open and can be executed immediately or at a scheduled time in the future.
Binary bets’ exit times can be decided by the trader and are typically available anywhere from 30 seconds to one year in the future.
Most binary bets can be made for as little as $/€/£ 1 and up to $/€/£ 5,000.
Now that we’ve covered the basics on binary betting, let’s turn to what the differences are between binary bets and binary options.
Binary Betting vs. Binary Options
Binary betting typically offers higher and more varied payouts, more flexible exit times and a wider range of formats than binary options.
Whereas binary options typically payout from 75%-85%, binary bets can pay out as little as 50% or as much as 100% of the investment amount.
When a trader “buys” or invests in a binary option, the option typically has a predetermined expiry time at which point the option either finishes in-the-money with a payout or out-of-the-money with no payout (note: some binary options offer an out-of-the-money payout of 5%-15%).
Binary bets, on the other hand, allow the trader to determine the bet’s expiry time (and start time) himself. In this way, a binary bet gives a trader more flexibility to decide when the wager will begin and reach its end.
Most binary options brokers offer two types of binary options: Up/Down (High/Low) and Touch options (some also offer Boundary (Range) options as well).
Binary betting is always available on a wider range of formats as detailed above: Rise/Fall, High/Low, In/Out, and Touch/No Touch. This wider range of options styles enables traders to have more financial instruments available in their toolbox to apply in differing financial environments.
While binary betting and binary options trading definitely share a lot in common, each form of speculating on the markets is different and offers it own set of advantages and disadvantages.
The best way to determine which is the best for you is to create a free trading account at each one and test drive each platform for yourself.
If you’re looking for a binary options broker, check out our list of brokers here.
For binary betting, we always recommend BetOnMarkets.com since they’ve been in the business the longest and have many accolades and awards to show for it and their platform is the most intuitive.