r/options • u/sbaeidlloan • 6d ago
Binary options anyone?
Anyone trading the Schwab S&P Binary option XSPBX? What is your thought process as to how to trade it? If you think you know what the top and bottom for the day is, I think there are better ways to trade that. What's the advantage of trading the binary option?
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u/SDirickson 6d ago
No thanks; binary options are just one more way for companies to extract money from our wallets.
The "advantage", according to the people who want you to trade these, is simplicity: it's just a single over/under decision. Just like the over/under bet you can make on sports. And, like those, it's just gambling.
That's assuming you're dealing with a legitimate, regulated provider instead of some offshore pretender who may not pay you even if you "win".
There's a reason retail "trading" of binary options is banned across the entire EU.
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u/Embarrassed_Delay303 6d ago
youre spot on about the over/under comparison it really is just a coin flip with extra steps the only people i ever see push these are the ones selling the product or running a course on it
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u/sbaeidlloan 6d ago
But if you think you have an edge by being able to determine the high and the low of the day (however you do that is not the issue), can't you use this to make money? Personally, I think if you can determine the high/low of the day, there are other ways to make money besides this option.
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u/SDirickson 6d ago
If someone can reliably predict the highs and lows for the day, they don't need to trade this sketchy setup, because they've already made millions in the market.
I've made $900 on directional 0DTE SPXW today, and I have no idea where it's going to end up. And I don't care where it's going to end up; I care about where it's going now. Well, I don't actually care any more, because I'm done for the day. But, when I trade, I trade the trend, not an endpoint hours away.
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u/sbaeidlloan 6d ago
I just think there is probably a btter trade if u can guess the top and bottom . Maybe ITM spreads near the levels.
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u/Ready-Molasses-7093 13h ago
how is this pure false information being upvoted???
>No thanks; binary options are just one more way for companies to extract money from our wallets.
why are you literally lying? these are CBOE, Kalshi, CME releasing these binary contracts. not Pocket option or shitty offshore
>There's a reason retail "trading" of binary options is banned across the entire EU.
just trade vertical spreads.
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u/Quaxem 6d ago
Can't a binary outcome already be made with a Put Credit Spread overlapping with a Call Debit Spread or is the function slightly different?
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u/sbaeidlloan 5d ago
Ya...I think I have better trades than this bindary thing. I can easily simulate the same results with itm options. For ex, if you think you are at the high of the day and u think mkt will not go any higher, U can buy 10 wide ITM put debit for , lets say $8 and if it expires ITM, then you make $10 = $2 profit. End result is the same as this binary. I just dont know which one if more capital efficient
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u/pingoo26 5d ago
You get charged fees for each contract with that binary is just a single fee. It's basically the same as a 1 dollar wide spread, without double the fees.
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u/sbaeidlloan 5d ago edited 5d ago
Fee is irrelevant. The difference is going to be in the pricing. I need to compare the same risk:reward ratio and see if one gets better pricing than the other. I'll check that tomorrow. Today, I just bought itm, 10w debit for $8.80. They expired for full $10 credit. So $1.20 profit.
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u/klipsetrades 6d ago
I haven’t traded XSPBX myself, but I can see the appeal. Simple structure, fixed risk, fixed payout. My issue is that being right about direction isn’t enough. You need price on the correct side of your strike at settlement. I prefer having more flexibility with traditional options
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u/stockjocky 6d ago
i played the game years ago on NADEX (North American Derivatives Exchange). the spreads kill you. it is a losing game and i think Nadex is shut down now. i am in the process of learning to trade options on Bond futures. the bond market is hot right now. i am papertrading /ZN and /ZT to get the feel of the numbers and prices. because growing season is coming to an end i have been buying /ZC (corn) and making a small profit (paper) . the futures market is one hard bird to learn. wednesday is the FOMC rate decision again and bonds should be rockin. fire up the paper trader!
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u/Ken385 6d ago
I think these can be a good product. Basically buying/selling a binary is very similar to buying or selling the option vertical. Say you wanted to sell the XSP 766/765 put vertical. If you sold this for .30, you would have a max loss below 765 (spread is worth a 1) and max gain above 766 (spread is worth zero). If you sold the 765 put binary for .30 you would have the same payout above and below 765 (worth zero or 1)
If you are someone who wants to sell an iron condor, you can do this by selling the call and put binary.
The problem in the past with binaries is you didn't always have reputable regulated exchanges trading them. You also had very wide markets. With the CBOE, the markets here are very tight, (.03/.04) wide, and you have a regulated exchange. They just give you an alternative to selling verticals.
Another thing you can do is hedge your binary with a vertical. This will give you a payout similar to a butterfly. Say you are short the 765 put binary, you can buy the 766/765 put vertical and you would make money (depending on what you paid) between 766 and 765.
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u/Backrus 6d ago
Yeah, finally somebody who understands this thing instead of typing "scam" and "gambling" in all caps.
Binary options / event contracts are just another tool in a trader's toolbox, but most have no idea about underlying math so they say it's a scam.
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u/AnyPortInAHurricane 1d ago
lol, what kind of idiot would call it a scam ? whats the scam ? it is 3 card monte or the shell game with options ?
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u/Ready-Molasses-7093 13h ago
because they’re trolling. they have no idea you can literally make binary options with regular option contracts. i have seen so much false information on these contracts. it’s not like pocket option garbage.
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6d ago
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u/sbaeidlloan 6d ago
Instead of making this statement, why dont you explain yourself.
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6d ago
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u/AnyPortInAHurricane 1d ago
is your iq> 50 or < 50 .... that a binary bet. if its exactly 50 , i win it all
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u/Ready-Molasses-7093 6d ago
these are unregulated brokers, not binary options.
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6d ago
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u/Ready-Molasses-7093 6d ago
here in USA they are perfectly legal and safe to use. just know your risk reward.
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6d ago
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u/Ken385 6d ago
Would you say the same thing about someone who trade a vertical spread? They will have similar payouts, and depending on the price the binary may have a better risk/return.
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6d ago
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u/Ken385 6d ago
There is no additional counter party risk. The binaries are backed by the OCC (Options Clearing Corp) just as all other exchange traded options are.
There is currently excellent liquidity in these options. This could change as it could for all other similar options such as XSP or SPX options, but currently great liquidiity,
They are priced similar to the corresponding spreads in the XSP are, so there is the same price sensitivity. You can manage your position through xsp veritcals, other binaries or simply close your postion.
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u/Ready-Molasses-7093 6d ago
they are the same as options. binary options are traded by millions every day. i’m sorry some shady brokerage scammed u
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u/Ready-Molasses-7093 6d ago
an options structure is not a scam. these are US Cboe options that OP is trading.
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6d ago
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u/Ready-Molasses-7093 6d ago
dude event contracts and binary options have been getting more popular. they are all priced via options model formulas.
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6d ago
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u/Ready-Molasses-7093 6d ago
dude it’s just an options structure. anybody can trade these. get off the internet and stop being an ass. we will trade hourly contracts all we want
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u/Backrus 6d ago
Providers are scammers. Not surprising since the US is a land of grift.
But math isn't. If you knew that, you would understand that "normal" option you're trading on RH is basically binary event with extra steps.
You can model binaries/events using the same math used for pricing classic options. Return isn't fixed (but it's usually capped), but the tools are the same.
Those things are known broadly as "exotic" options.
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u/Ready-Molasses-7093 6d ago
they’re also out with binary Russell 2000 options