The Black Scholes smiling graph.

As you are probably familiar with, the Black-Scholes model is the basis for Binary Trading, a new form of derivative investment that enables you to make money based on your accurate prediction of how the market will perform.

$dV=\left(\mu S \frac{\partial V}{\partial S}+\frac{\partial V}{\partial t}+\frac{1}{2}\sigma^{2}S^{2}\frac{\partial^{2} V}{\partial S^{2}}\right)dt+\sigma S \frac{\partial V}{\partial S}\,dW.$

This means that you can make good money by accurately predicting that a stock or other investment will go down in price, will remain the same, or will reach or drop to a certain level. While in the past, stocks would only be of use to an investor if they performed well (or in the example of a short sale, performed poorly) - but the Black Scholes model allows for "Binary Trading" meaning that you can hedge the market based on all-or-nothing positions, meaning you make 85% (or so) profit if you are right and loose 100% if you are wrong.

$\Delta S = \mu S \,\Delta t+\sigma S\,\Delta W\,$

$\Delta V=\left(\mu S \frac{\partial V}{\partial S}+\frac{\partial V}{\partial t}+\frac{1}{2}\sigma^{2}S^{2}\frac{\partial^{2} V}{\partial S^{2}}\right)\Delta t+\sigma S \frac{\partial V}{\partial S}\,\Delta W.$

With the way the market has behaved in the recent years, it became critical for investors to be able to make money using their knowledge of the market, without having to wait YEARS for the bull market to return.

Basically, if you can look at a graph and predict where it will go next, then binary options trading is right for you.

Black- Scholes - Basics for Binary Trading

Monday, July 25, 2011

The Black Scholes smiling graph.

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