Binaries are an exciting way to trade on volatility in the underlying market. We offer various types of Binaries across a range of exciting markets.
What is a Binary contract?
A Binary contract is based on the performance of a financial market over a specific time, with only two possible outcomes. Contracts are priced between 0 and 100 based on several factors, mainly the time to expiry and the underlying market price. A Binary asks simply whether an event will occur or not. The only possible answers are ‘yes’ and ‘no’.
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How Binaries work
A Binary allows you to take a view on whether a specific outcome will or will not occur. For example, ‘Will Wall Street close up on the day?’
- If the answer is ‘yes’, the Binary settles at 100
- If the answer is ‘no’, the Binary settles at 0
- Your profit or loss is simply the difference between either 100 (if the event occurs) or zero (if the event doesn’t occur) and the level at which you ‘bought’ or ‘sold’
Binary prices can be extremely volatile even when the underlying market is relatively static. A small move in the underlying can make all the difference between the Binary settling at 0 or 100.
Binary Markets
Indices
Binary contracts are offered against the official closing level of the underlying index/future relative to the previous day’s closing level. We offer a range of different timescales for Binary contracts, including weekly, intraday and hourly positions, as well as fast-moving 20-minute and even five-minute contracts on the FTSE 100 and Wall Street.
FX
Spot binary contracts are offered against the 8pm rate of the forex pair concerned. For example, ‘EUR/USD up (> 13186)’ concerns whether the level of EUR/USD will be above the specified level at 8pm. ‘GBP/USD to touch 14200 (APR-10)’, however, concerns whether GBP/USD will touch 14200 even once before the last trading day. Weekly FX binaries expire as of Bloomberg’s first price at/after 8pm each Friday, market holidays permitting.
Commodities
Binary contracts are offered against the official daily settlement of the relevant futures contract for the nearest liquid month. So, ‘June US Crude to finish above 84.46’ concerns whether the June US Crude contract will finish above 84.46 on the last trading day. Crude Oil Binaries are offered on hourly changes in the relevant futures contract.
Binary specials
We offer a number of Binary contracts on selected markets.
Economic Data bets Binaries based on major economic indicators, such as US Non-Farm Payrolls, US Initial Jobless Claims and the Bank of England’s MPC interest rate changes.
Twenty- and five-minute contracts Will the index rise in the next 20 minutes? Take a 20-minute contract on the FTSE or Wall Street. (Please note that due to the fast-moving nature of Binary contract prices, these products are only available through our online dealing platform.)
Types of Binaries
All Binaries settle at either 0 or 100, but there are different criteria to be satisfied for different types of Binaries.
Some Binaries require a certain criterion to be satisfied upon expiry, e.g. FTSE to finish up on the day. Others require that a certain criterion be satisfied any time before expiry, e.g. Wall Street to touch 10800 before 6pm.
Up or Down
An Up or Down contract is as simple as it sounds. A ‘FTSE to finish Down’ contract will settle at 100 if the FTSE’s closing price is down on its opening price. In the same way, that contract would settle at 0 if in fact the FTSE finishes up.
For a look at how particular Binary types work, see our examples page.
Ladders
A Ladder contract is a specific type of Up or Down contract, but has the condition that the underlying market will finish above a stated level. For example, a ‘FTSE to finish above 5800’ Ladder will settle at 100 if the FTSE finishes the day above 5800 and at 0 if the FTSE finishes below 5800.
For a look at how particular Binary types work, see our examples page
Targets
A Target contract is an even more specific type of Up or Down contract, in that it requires the market to finish in a particular range. For example, a ‘FTSE to finish down 60-70pts’ contract will settle at 100 if the FTSE closes down by between 60 and 70 points or at zero in all other cases.
For a look at how particular Binary types work, see our examples page.
Hi-Lo
A Hi-Lo contract is similar to a Target contract, except it concerns the day’s high or low point, not the closing price. It is simply a question of whether the day’s high or low will be a given distance from the previous closing level, for example ‘FTSE cash high to be +50 to +60’.
OneTouch
A OneTouch contract asks whether the market will touch or go through the barrier level at any time before the stated expiry. The market will settle at 100 if the level in question is breached before expiry and will settle at 0 if the level is not breached before expiry.
Tunnels
A Tunnel contract hinges on whether a market will stay within two given barrier levels for the full period to expiry. For example, a Tunnel contract might read ‘FTSE to keep in range -50 to +50’, meaning the position will settle at 100 if the FTSE stays within 50 points either side of its opening price. Similarly, the position will settle at 0 if at any point during the day the price is outside of the tunnel.
Spreads
We offer a range of variable spreads on Binary contracts.
You can trade on weekly, daily, hourly and 20-minute Binaries, as well as exotic Binaries that can expire throughout the day if a certain price is met.
Most Binary markets will have a spread of between four and six points. As prices move towards 50-50 the spread will be closer to six and as prices move towards 0 or 100 the spread will tend to the lower end of the scale. Often, the spread will increase above the given range at the very end of a market if the price is close to 50–50.
Limited Risk
All Binaries are strictly limited risk. Either way, your loss is limited to the difference between the opening value and the closing value (either 0 or 100) multiplied by your stake.
So if you buy a binary, your loss cannot exceed (your stake x the buying price); if you are selling, your loss cannot exceed (your stake x (100-the selling price)).
For more details on the risk involved in Binaries, see our examples page.
Regulation
Forex brokers Canada Ltd is authorized and regulated by the Financial Services Authority. FSA number 195355.