An extremely helpful side effect of the pricing and payoff structure of a binary option (such as a Fixed Return Option, or FRO) is that the bid and ask both represent the probabilities the buyer and seller assign to an event happening. Binary options paying $100 or $0 depending on whether or not the government [...]
Entries Tagged as 'Fixed Return Options'
FRO Market Clarifies Bets on Goldman Sachs (GS)
September 26th, 2008 · No Comments · Fixed Return Options, Hot Stocks
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Fixed Return Options (FROs) Offer Overlooked Shorting Opportunity
September 22nd, 2008 · No Comments · Fixed Return Options, Hot Stocks, Options 101, The Markets
The dramatic series of policy decisions affecting our capital markets in the last week generally requires extremely nuanced discussion of the pros and cons, with one exception – the ban on shorting financial stocks. This is a complete perversion of free market principles and will do more to add to market inefficiency than anything else. [...]
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Understanding Binary Options
July 22nd, 2008 · 1 Comment · Fixed Return Options, Options 101
Binary options are good for beginners that want to get their feet wet, without worrying too much about all the jargon used in trading stocks. With binary options you either win or lose – there is no in between. The basic concept is that you buy a contract, either in the buy or sell mode [...]
Use FROs to Press Shorts Against Rallying Financials
July 20th, 2008 · No Comments · Fixed Return Options
Binary options (see: “Understanding Fixed Return Options (FROs)” offer traders another way to make leveraged bets on equities. While the total number of stocks and indices on which FROs are available is still relatively small due to FROs only being available for a handful of months, I see several trade set-ups: After hitting an intra-week [...]
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Binary Options: Two Possible Outcomes for Trading Success
July 16th, 2008 · 1 Comment · Fixed Return Options, Options 101, The Markets
Binary options, also known as digital options or all-or-nothing options, are contracts which have only two possible outcomes – either they win, or they lose. Essentially, a binary option involves a fixed payout after the underlying stock meets or exceeds its predetermined threshold or strike price. Values of binary options payouts are determined at the [...]
Tags: all-or-nothing·binary options·call·digital options·in-the-money·put
Binaries Provide All-or-Nothing Bet, Even on the Weather
July 16th, 2008 · No Comments · Fixed Return Options, Options 101
A binary option is an all-or-nothing contract. The prefix “bi” denotes two possible outcomes for the investor. Other common names for binaries include fixed return options (FRO), all-or-nothing options and digital options for their on-off payment structure. Binary options are a new investment vehicle to hit the American Stock Exchange (AMEX). The contract calls for [...]
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AMEX FRO SETTLEMENT INDEX (VWAP)
May 15th, 2008 · 3 Comments · Fixed Return Options, Options 101
Another index to understand. Luckily, this one is easier to understand than it sounds. Fixed Return Options (FROs) were recently launched on AMEX. FROs are defined here, but there is one critical point to understand. Traditional options (puts or calls) rely on the underlying stock’s price when the market closes on the expiration date. The [...]
Fixed Return Options: Key Concepts of the Horse Race
May 14th, 2008 · No Comments · Fixed Return Options
Fixed Return Options are “binary” otions with a per-contract fixed return amount of $100.00. Fixed Return Options are offered in the following two forms: Finish High FRO Finish Low FRO A Finish High FRO is similar to a standard list call option in that an investor purchasing a Finish High FRO is bullish on the [...]
Understanding Fixed Return Options (FROs)
May 13th, 2008 · 5 Comments · Fixed Return Options, Options 101
Fixed Return Options (FROs) are a new type of exotic options, however don’t let ‘exotic’ scare you – it doesn’t mean FROs are complicated. In fact they’re really simple, they are just a bit different from standard put and call options. FROs are binary options, meaning there are only 2 possible outcomes. They offer a [...]
Is anyone trading with Fixed Return Options (FRO)
May 9th, 2008 · 2 Comments · Fixed Return Options
I am hoping to get my feet wet here with Fixed Return Options: Anyone else trying them? TradeKing has a good whitepaper on them… Did you like this? Share it:Tweet
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