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Cedar Finance Review - How I make $872 LIVE [Watch NOW]

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Published on Aug 1, 2014

Free $100 Account: http://2by.us/cedar

Relationship to vanilla options' Greeks[edit]
Since a binary call is a mathematical derivative of a vanilla call with respect to strike, the price of a binary call has the same shape as the delta of a vanilla call, and the delta of a binary call has the same shape as the gamma of a vanilla call.

Interpretation of prices[edit]
In a prediction market, binary options are used to find out a population's best estimate of an event occurring – for example, a price of 0.65 on a binary option triggered by the Democratic candidate winning the next US Presidential election can be interpreted as an estimate of 65% likelihood of him winning.

In financial markets, expected returns on a stock or other instrument are already priced into the stock. However, a binary options market provides other information. Just as the regular options market reveals the market's estimate of variance (volatility), i.e. the second moment, a binary options market reveals the market's estimate of skew, i.e. the third moment.

In theory, a portfolio of binary options can also be used to synthetically recreate (or valuate) any other option (analogous to integration), although in practical terms this is not possible due to the lack of depth of the market for these relatively thinly traded securities.

In theory a portfolio of options can synthetically recreate any other financial instrument, including conventional options.

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For More: http://binaryoptionsdailyreview.com/

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