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A binary bet is a form of fixed-odds betting, but expressed in a different format. The key features of this format are that –

• If the bet is a winner it is priced at 100, and
• If it is a loser it is priced at zero.

The word binary means “involving two” and it is because the final price is either 100 or zero (ie two distinct prices) that this form of betting is known as binary betting.

Let's look at an example:

A fractional bet of 3 to 1 is the same as a binary bet priced at 20/25. Here is how both bets work:

If we bet £100 at 3 to 1 then our maximum risk is £100 and that is all we can lose. If we win we receive £300 (3 x £100) and we get back our stake. Our profit is £300.

• To bet the same on the binary, we would buy at 25 (the quoted price is 20/25, and when buying one always pay the higher price).
• We have a choice of how much we can bet per point. In this case, we will bet £4 per point.

Consider the two possible outcomes:

• If we lose, the binary price goes to zero, and we lose £100 (25 x £4).
• If we win, the binary price goes to 100, and we receive £300 (75 x £4). The 75 being the closing price at 100 less our purchase price at 25.

So the profit and loss is the same for the fractional bet (“3 to 1”) and the binary bet (20/25): the upside is to win £300, and the downside is to lose £100.

A binary bet is a way of placing a bet which gives you three key advantages:

1. Your risk is always limited,
2. Your reward can be very high, and
3. You can profit at any point after you place the bet

With Binary Betting you can close a bet when you want and this point needs to be fully understood as it adds another dimension to how you can bet. With most “betting” you would place your bet and then your only option is to sit and wait for the event to occur. This means:

• Waiting until the race or the match is over to see whether you had won or lost
• Waiting for the market to close if you have made a financial bet.

With binary bets you have this choice:

• You sit and wait for the event to occur and the bet will then close at either 100 or zero.
• You take your profit whenever you want. This is also known as closing and I should add that you will not always be closing at a profit.

Here are several reasons:

• You have a good profit in hand and you want to take it
• You have a good profit but the price is now moving against you and you want to take the profit while you still can
• You are down and you don't want to lose your full stake.
• You placed the bet for certain reasons and something has now changed so you want out
• You just feel like it
• You have a hunch
• By taking your profit now you end up with an overall profit on the day and you find this gives you a boost for betting tomorrow
• You were attracted by the low risk/high profit opportunity when you bought the bet (below 20) but now it is well up (above 70) you don't want to risk all that for a limited reward

Although being able to close your bet early is clearly a huge advantage, it does have one significant drawback: That YOU have to decide whether to get out early.

This can be a very difficult decision.

In trading binary bets my biggest problem is how much profit to take. I have no real problem cutting my losses, or taking my losses on the nose, and it does help enormously that my losses are always small. But there is a significant difference between taking 20 points of profit out of the market or 60 points and that comes down to how you manage the trade once you have placed your bet.

I think the best advice I can give you is that once the bet is going your way – stick with it! It may feel like a bucking bronco but if a bet goes all the way, and they often do, your profits may increase exponentially.

So ride 'em cowboy!

Binary bets are a bridge between the betting world and the financial world, which is why it is necessary to sometimes talk about betting and some times talk about trading. If there is a difference between these two terms perhaps it is because usually a bet cannot be closed before the event is over, whereas a trade can be. But when it comes to binary bets, they are called bets but you can close them before the event is over. When you place your bet (and this is also known as opening your position) you can call it either trading or betting and if you run the “bet” to expiry then it again makes little difference. But if you close before expiry then I would say you are trading. In fact there is a case for saying these bets should be known as binary “trades.”