Wednesday, August 8, 2012
Binary Options Long - Short - Daily report 8th August S&P 500 Emini Futures
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Binary Options Long - Short - Daily report 8th August S&P 500 Emini Futures.
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text courtesy Of Wikepedia.
A callable bull/bear contract, or CBBC in short form, is a derivative that provides investors with a leveraged investment in underlying assets, which can be a single stock, or an index. They are usually issued by third parties, mostly investment banks, but neither stock exchanges nor asset owners. It was first introduced in Europe and Australia in 2001, and is now popular in United Kingdom, Germany, Switzerland, Italy, and Hong Kong.
[edit] PrincipleCBBC has two types of contracts, callable bull contract and callable bear contract, which are always issued in the money. By investing in a callable bull contract, investors are bullish on the prospect of the underlying asset and intend to capture its potential price appreciation. Conversely, investors buying a callable bear contract are bearish on the prospect of the underlying asset and try to make a profit in a falling market.[1]
CBBC is typically issued at a price that represents the difference between the spot price of the underlying asset and the strike price of the CBBCs, plus a small premium (which is usually the funding cost). The strike price can be equal to or lower (bull)/higher (bear) than the call price. The call price is also referred to as "stop loss", "trigger point", "knockout point" or "barrier" by different traders.
However, CBBC will expire at a predefined date or will be called immediately by the issuers when the price of the underlying asset reaches a call price before expiry.[2]
Binary options are high risk financial instruments where a prediction is made regarding the price of an asset at a certain period of the day. The predictions made relate to very small price modifications, which are extremely hard to predict, hence the high risk factor.
In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and Fixed Return Options (FROs) (on the American Stock Exchange). Binary options are usually European-style options.
For example, a purchase is made of a binary cash-or-nothing call option on XYZ Corp's stock struck at $100 with a binary payoff of $1000. Then, if at the future maturity date, the stock is trading at or above $100, $1000 is received. If its stock is trading below $100, nothing is received.
In the popular Black-Scholes model, the value of a digital option can be expressed in terms of the cumulative normal distribution function.