2. Binary Prices

2.1 Binary Prices

Binary prices are the most natural and intuitive way of expressing odds. The "binary price" is a value between 0 and 100 which is simply the percentage chance of the event occurring.

As the event becomes more likely the binary price will move towards 100; as it becomes less likely the price moves towards 0. The bet will be settled at a level of 100 if the event occurred; or at a level of 0 if it did not occur.

The key difference between binary and decimal odds is the staking method - with binary prices you bet a certain amount per percentage point. This means that for every unit change in the binary price you win or lose a fixed amount.

You can "buy" if you think the binary price is going to rise. For example:

• You buy £1 per point of Roger Federer to win Wimbledon at a price of 80. You would then have a net position of +£1 / point.
• If Federer wins Wimbledon, then the bet is settled at a level of 100, and you make a profit of £20 ( (100-80) * £1 ).
• If Federer does not win, then the bet is settled at a level of 0, and you make a loss of -£80 ( (0-80) * £1 ).

Likewise you can "sell" if you think the binary price is going to fall:

• You sell £1 per point of Roger Federer to win Wimbledon at 80. You would then have a net position of -£1 / point.
• If Federer wins Wimbledon, then the bet is settled at a level of 100, and you make a loss of -£20 ( (80-100) * £1 ).
• If Federer does not win, then the bet is settled at a level of 0, and you make a profit of £80 ( (80-0) * £1 ).

2.2 Net Position

Your "net position" on a particular market is the difference between the combined stake of all your buy orders and the combined stake of your sell orders on that market. The net position only applies to "filled" (matched) orders and is initially zero on a new market. Buy orders which are filled result in an increase in net position; sell orders result in a decrease.

Whenever the net position is zero, you will win or lose the same amount regardless of the outcome (also known as "greening up").

In this diagram, the net position of -0.10 / point was a result of a single sell order of 0.10 / point at a price of 77.5. If there have been several trades in the same direction then the average price ("Avg") updates to reflect this. A coloured background is shown for both items as a clear indicator of whether the current net position is positive or negative. In the diagram above, a pink background confirms that the net position is negative; a blue background is shown when the net position is positive.

In financial terminology, a "long" net position refers to a positive net position; "short" refers to a negative net position.

Go to next section - 3. Getting Started

Back to previous section - 1. Introduction

Back to BDI Reference Guide