Looking at forex through five-minute prisms

摘要

Forex trading in the United States, and perhaps globally, may be revolutionized by the introduction of Cantor Exchange's (CE) short duration binary contracts, which opened earlier this year. These binaries offer the same basic features of binary options as other markets, including a fixed payout at S100 per lot and no margin borrowing, but the CE offers five-minute expirations as well as end-of-day binary options on the EUR/USD, GBP/USD and USD/JPY. The CE also permits an "RFQ" process whereby market participants can request to trade any expiration time so long as it coincides with the calculation of CE's minute-by-minute spot settlement index. Here's how shorter duration (e.g., five-minute) expirations work and the implication of these instruments for traders and the industry. Certainly five-minute binaries are more exciting than longer duration binaries; however, the key question is whether five-minute binaries can be traded effectively. For such short duration options, would a flip of a coin work as well as a more studied approach? Would one-minute binaries be a tool for assisting the spot trader? The answers are surprising.