Understanding Binary Contract Odds at Tradesports
Binary 0-100 Contracts. When the odds are displayed in this manner, as they are on Tradesports.com, it gives a real trading feel to the bets that you make. This method of wagering takes what is essentially a bet and turns it into a futures contract that you can buy and sell, similar to trading options or commodities futures.
When you think about it, trading in the financial markets boils down to just making bets. The contracts traded on the big exchanges like the Chicago Board of Trade could be converted into US Moneyline odds and traded that way as well, much like the daily financial closings on TradebetX are displayed.
Don’t hold your breath on CBOT making that change. Odds displayed as futures contracts are much more exciting to trade, and have a very addicting feel to them. For rapid-fire daytrading tactics, they are the way to go. You should learn to become proficient with them if you want to get the most out of your Tradesports experience.
0-100 Contracts expire at a value of either 0 or 100. For example, if the contract is for Chicago -3.5 and they win by 3 points then that contract will expire at zero. If they win by 4 points it will expire at 100. Before the event is over the contract could be trading at any price in between - and in see-saw, back and forth battles it will trade all over the board. What price you buy or sell the contract at to open your position determines whether you are laying or taking the odds on what the end result will be.
Of course, you may not be planning on waiting until the end result to close your position. In that case you are simply speculating that the contract will trade in your direction in the very near term. (But you still take or lay odds based on the the final outcome.)
Remember that you sell to open about half of your positions when trading in this manner. The price of 50 is even money in either direction. Anything below or above 50 means that you are either taking or laying odds on the final outcome of the event. For example, if you sell a contract at 53 to open your position on Chicago -3.5, then you are taking +112 odds on Minnesota + 3.5. This is the same thing as betting at TradebetX on Minnesota +3.5 getting +112. You just need to adjust the number of contracts so that your risk dollars are the correct bet size.The number of contracts offered represent the total amount of money available at any particular odds increment on a proposition. So what is a single contract worth that expires at 100? Ten dollars. Ten contracts is worth $100. Twenty is worth $200.
Going back to a single contract, if you were to buy one contract at a price of 50 that will cost you $5.00. It will be worth $10 if it expires a winner. So ten contracts at 50 will cost $50 and expire at a value $100 if a winner. Twenty will cost $100 and expire a winner at $200. At a price of 50 you will always double your risk money on an expired contract that wins.
To figure the dollar value of a winning contract multiply $10 by the number of contracts. What it is going to cost you in risk dollars depends on the price it is trading at, or the price you can get an offer filled at.
But it might help to just remember what an expired position is worth - ten contracts is always worth $100, twenty contracts is always worth $200, and so on. It’s the price you pay to open them that makes the difference!
Which side of 50 you are on and whether you are buying or selling the contract determine whether you are taking or laying the odds. Selling at any distance above 50 costs the same as buying the same distance below 50. For example, buying one contract at 45 costs $4.50 or selling one contract at 55 costs $4.50. Either way you are risking $4.50 to win $5.50 if the contract expires a winner. Multiply that by the number of contracts you are trading to get your risk dollars.
Conversely, when buying above 50 or selling below 50 you are laying odds. That is, risking more than you can win. (Notice that for buying contracts it is very simple, just insert a decimal point in the price and you have the dollar cost per contract - 35 costs $3.50, 65 costs $6.50, etc. Selling is a little tougher to see because you have to take whatever is left out of 100 and that’s what it costs - for example, selling at 65 costs $3.50 per contract.)
In reality, all this is figured for you instantly so you won’t need to do any calculating. Just click on the contract you want to trade, set the price that you want, then adjust the number of contracts until your risk dollars are about the amount you want to bet. The risk/reward dollars display adjusts constantly to whatever numbers you are plugging in. With a little practice you will begin to recognize how large the current offers are dollar-wise relative to the size that you are trading.
