Obama Binary Options, and their shell websites, also offers pair trading.
With pair binary options you are betting which of two stocks will perform best over a duration of time (e.g., 1 minute, 5 minutes, 3 days, 1 year). En example would be that you choice the pair of Google and Microsoft with the prediction that the price of Google will outperform that of Microsoft over the course of the time segment that you have chosen. At the closure of the time segment the relative performance of each pair is measured. In this instance you would win your investment (a large, and predetermined before you bet, percentage of your bet money) if Google had outperformed.
Binary Options and Binary Pair Options available on the websites run by Obama Binary Options are non exchange-traded binary options, which are defined by Wikipedia as:
Binary options contracts have long been available over-the-counter (OTC), i.e. sold directly by the issuer to the buyer. They were generally considered “exotic” instruments and there was no liquid market for trading these instruments between their issuance and expiration. They were often seen embedded in more complex option contracts.
Since mid-2008 binary options websites called binary option trading platforms have been offering a simplified version of exchange-traded binary options. It is estimated that around 90 such platforms (including white label products) have been in operation as of January 2012, offering options on some 200 underlying assets.
The platforms offer standardized short-term binary options with a pre-determined profit/loss, that cannot be liquidated (buy or sell to close) before expiry, unless the platform or broker allow such liquidation.
The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have issued a joint warning to American investors regarding unregulated binary options.
The platforms do not charge fees from their investors.
So how do they make money? A legitimate binary options platform or broker might use the following formula (but scam brokers like Obama Binary Options DO NOT, they just pocket your deposit and typically, even if you do win after their misleading ‘brokers’ talk you into bad bets, don’t allow customers to withdraw funds):
Their profit comes from the difference between the options that expire in the money to options that expire out of the money. This difference can be found by the formula below. In this (for each base asset with same expiry characteristics), (W) is the in the money option payout in percentage terms (e.g. 1.7), (L) is the out of the money option payout in percentage terms (e.g. 0.15), are the turnovers of transactions made for each outcome (e.g. $1,000), (S) is the platform’s gain.
In this example the platform’s turnover is $2,000 and its profit is $150 or 7.5% on turnover. As the platform’s gain comes from the above formula, most platforms will be indifferent as to the outcome of a single trade. Note that if is not equal to then the platform will have to act as a market maker. This can cause the platform gain (S) to be more volatile than in the above formula. In order for a trader to make a long term profit he has to predict correctly roughly 54.5% of the time (depending on in-the-money and out-of-the money payouts).
Even if you do win your bet or prediction (or ‘trade’ if you still want to call it that) you typically cannot withdraw your winnings, or original deposit, (outside of a credit card charge back) from the websites run by Obama Binary Options.
Obama Binary Options also effectively avoids, or combats, credit card charge backs by requiring the customer to email them a scan of the following when making a deposit of $1000 and upwards:
1. drivers license
2. credit card - front and back of credit card (middle group of numbers blacked out, and security code blacked out)
3. utility bill with same billing address
4. email stating that they give the company permission to accept their deposit for trading
It becomes somewhat difficult to convince the credit card company that the charge was not valid when you’ve provided the company with everything but your long form birth certificate.
It should also be noted that the ‘brokers’ (they are not brokers) use misleading and high pressure tactics to influence customers to make large deposits and bad ‘trades’ (bets). Is that illegal? Of course it is, here as example:
Stay tuned for report #4 on Obama Binary Options.
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