While not binary options in the strictest sense of the word, single-payment options trading (or SPOT, if you like) is quite similar to them in a number of ways. In fact, you could even think of SPOT options as custom-made binary options, which you can tailor to suit your own desires. They are the perfect solution for people who consider standard binary options a bit restrictive for their own purposes, and are considered extremely popular in forex markets.
What are SPOT options?
Technically speaking, a SPOT option enables you to set the amount of money you wish to receive, as well as the conditions that are to be met for said payout to transpire. Your counterparty, usually a broker, will then assess the probability and name the fee (or a premium) that he or she deems appropriate. That fee usually comes in the form of a percentage of your winnings (the broker takes a cut from the money you expect to make). Once the particulars have been arranged, the deal is set to commence. The reason SPOT options count as binaries is because they only offer two possible outcomes: a) the conditions are met within the specified time window and you receive the payout you requested or, b) the conditions are not met within the specified time window, meaning your SPOT options expire worthless and you get nothing.
Pros and cons
First and foremost, SPOT options are extremely versatile. You can mold them into just about any kind of deal, as long as there is someone on the opposite end of the table, ready to take you up on your offer – and with modern markets being what they are, this is hardly ever an issue. True, you cannot close positions once entered, but then again why would you? You’ve designed them yourself, in a way so you never have to close out in the first place. But then again, SPOT options cannot be sold and this needs to be said. You have nothing to lose, apart from the premium which you pay anyway. Then again, your broker gets to set the premium, and your best interests may not be what he has at his heart while doing so. SPOT options will have you predicting future, which is uncertain already. The risks involved have to be assessed carefully, along with possible rewards. Still, when it comes to taking matters into your own hands, SPOT options are the way to go, at least when finances are concerned.
It seems redundant to talk about similarities and differences of regular binary options and SPOT options; after all, many experts consider SPOT options to be an offshoot of regular binary options, which are themselves a variation of regular options. Things truly are interconnected in the financial markets, and in general. In any case, SPOT options are your own means to your own ends, just be careful not to hoist yourself with your own petard – because it is simply… embarrassing.