Collateral, Sizing and Bankroll
A good probability and a fair price still leave the hardest question: how much. Binaries sharpen the sizing problem, because positions resolve all-or-nothing and, on most regulated venues, consume their worst-case loss in cash from the moment of the trade.
Collateral is the denominator
Full collateralisation means a position's capital cost is its maximum loss. Buy 1,000 contracts at 62 cents and $620 is locked until resolution; sell the same contracts and $380 is. Two consequences follow. Returns must be computed on locked collateral and elapsed time, a 2 cent edge on a 62 cent contract that resolves next week annualises spectacularly, while the same edge locked for a year may lose to the risk-free rate, which is why some venues pay interest-like incentives on posted collateral. And capital, not ideas, becomes the binding constraint: a book of fully collateralised positions runs out of money long before it runs out of attractive trades, so sizing is portfolio allocation, not per-trade enthusiasm.
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