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The options market |

An option is a financial instrument that let you buy or sell an asset at a future time. What does it have to do with poker you may ask? The answer is that like poker the option market is based on expectations. The theoretical value of an option is the expected value of that position. Likewise the value of your hand in poker is its expected value. By expected value we mean the weighted average of all possible future scenarios that could happen. To calculate the value of a hand in poker we look at all possible cases, like turn and river cards, and we calculate the average value of the profit or loss of that hand. Likewise the mathematical model evaluating option prices will look at each path the asset can take and will multiply the final value of the option along that path times the probability of that path occurring. Integrating over the probability distribution of the asset price gives the expected value. Nowadays a lot of poker players or sports betters turn to the option market as a new source of fun and entertainment in the gaming world. Trading is very similar to gaming and in particular when you trade options or binary options. These contracts let you take a bet against the future market value of a currency or stock, and this is why gamblers used to making bets feel comfortable with these products. The binary options market is a small section of the options market itself, but what is appealing to these new players is the simplicity coming from the fixed odds feature of binary options. Unlike any other option when you buy a binary option you know exactly how much you pay (how much you risk) and how much profit you can make (the ROI). These two numbers are predefined before the trade. For example a standard trade is if the trader is right he gets 80% of his bet, and if he is wrong he gets 15% back. Standard options are much more complicated than that as the final value of the option can be any positive number or zero. Fixed odds let the trader make a calculated bet of such or such asset making such or such move before the option expiration. This is the first time in history the average Joe can make such a pure bet on the market, and this is why these products are exploding in popularity. And you do not have to make large bets or send a lot of money to participate in the binary options market. Typically you just need to transfer a few hundred dollars and you can buy options as low as 10$ or even lower. And you can use demo accounts also, that let you try their trading platform without sending any money. This is the way to get started as you should first trust and like the product before you get financially committed. |