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Fixed odds financial betting

Fixed odds financial betting forms the third tier of our analysis of the financial betting market, and in many ways this is a hybrid of both spread betting and $inary bettingoviding a bridge between the two methods. In fact fixed odds financial betting has been around for many years, but has never really grown in popularity or become a mainstream method for many traders. The reasons for this are unclear, as the method has much to commend it, being simple, low risk and with a range of exotic bets offered in a variety of markets and instruments. However, from my own personal perspective, many of the bets offered suggest that the system methodology has been designed with ‘gamblers’ in mind, rather than for traders and speculators who trade for a living. In other words I believe that whilst fixed odds trading is a low risk method, the structure of the bets offered suggests that this nothing more than gambling on the markets, rather than trading as a business. If you are looking for some fun bets, then this is the place to go – if you are a professional trader and in this to make money, then I would suggest that spread betting or binary betting is the better option, and I hope the following explanation of how fixed odds betting works and is currently marketed will make this clear.

Fixed odds betting, as the name implies, is based on fixed odds, in just the same way as for binary betting. The risk on any bet is set and known in advance, along with the profit and loss, making this a low risk way of trading for the novice or beginner. However, where I have an issue is that fixed odds bets are generally presented in a very different way to binary bets which as we have seen float throughout the trading session and the period of the bet. In financial fixed odds, the bet is presented as an amount you wish to bet for an event happening, or not, and the bet is then priced for you to accept or decline. So let’s take a simple example as follows with the FTSE 100 once again.

You decide that the UK FTSE100 Index is due to rise today, and therefore look for a bet that the market will close up by the end of the day. This is often referred to as a bull bet in the fixed odds world. You navigate to the page for indices, and you will then be asked a series of questions as follows :

  • I wish to win ( select the amount you wish to win)
  • If ( select the appropriate index)
  • Is ( select whether higher or lower )
  • At ( select the start time)
  • Than at ( select the end time)

So, the first thing we decide is how much we would like to win, let’s say it is £200. We then select the FTSE 100 as our index, and tick the box that we want to bet that it will be higher, followed by the start time of our bet, and the end time. Having completed all the relevant boxes, the system will then automatically calculate how much this bet will cost you and display this alongside in seconds. You then have a short time to accept the bet in which case the funds are deducted from your account. Should you be correct in your market analysis, then you will win the fixed amount stated, and if you are wrong them the bet will close and you will lose your stake ( the cost of the bet).

Now where I have an issue with the above system is that the odds being quoted are neither transparent nor clear. In both binary betting and spread betting the spread being quoted immediately tells us the profit on that particular quote, and if we don’t like the spread, then we can always look elsewhere for a tighter quote. In $inary optionse pricing not only gives us the profit element for the company or broker, but also tells us the probability of the winning or losing – in other words this is a transparent system ( as far as any can be transparent). However, the above pricing system, in my view, for fixed odds financial betting is far from transparent, and whilst many experienced traders could work out the odds for themselves, new traders are unlikely to have this ability.

In addition, and as I mentioned above, fixed odds betting companies tend to offer a wide range of bets over various timescales, and whilst many of these are similar to binary bets in terms of time and complexity, many of the short term bets are simply akin to a flip of a coin, betting on the next tick, the next five seconds, or predicting the last digit after five ticks – all very interesting and no doubt fun, but not really the sort of introduction to trading that I would advocate. This sounds very prudish – it isn’t meant to, nor is it designed to put new traders off fixed odds trading, which has many advantages. Used correctly it is just as valid as binary betting with it’s low risk/low reward profile. However, the associated ‘side bets’ tend to display the roots of this financial betting methodology which I believe is unfortunate, certainly for novice traders – but no doubt good business for the fixed odds betting companies.