HedgeStreet
From MarketsWiki
HedgeStreet® launched in 2004 as the first Internet-based, government-regulated market for traders to hedge against or speculate on small, inexpensive, easy-to-understand event-derivative contracts. HedgeStreet, Inc., originally a privately held corporation based in San Mateo, California, owned and operated the HedgeStreet Exchange. The exchange is regulated by the Commodity Futures Trading Commission. HedgeStreet also has contracted with NFA to assist with market surveillance.
On November 19, 2007, HedgeStreet announced[1] IG Group Holdings plc had agreed to purchase HedgeStreet, Inc. for $6.0 million.
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Contracts
Contracts are in the form of "binary options," which have only two outcomes (ergo, "binary) -- correct and incorrect. These binary options contracts span a range of markets, from commodities and currencies to economic indicators, employment, fuel, inflation and interest rates. Seasonal/infrequent contracts include hurricanes, mergers and acquisitions, and housing prices for various U.S. cities.
HedgeStreet members have access to a complete trading system including order entry, market depth, historical data services, cash accounting and position reporting.
How HedgeStreet Binaries Work
In the simplest sense, here's how a binary option might work, with a $100 contract on crude oil:
1) Crude oil is currently trading at $55, and you think it will end the day above $56.
2) $56 becomes your strike price, and you pay $40 to have the right to express your opinion in the market.
3) Another market participant believes that it will close the day at or below $56, and puts up $60 to express his/her opinion.
4) If you are correct, you collect the difference between $100 and the $40 you spent to make your opinion in the market, or $60 + $40 (your original downstroke).
5) If the opposing market participant is correct, he/she collects the difference between $100 and the $60 he/she spent to register an opinion in the market, or $40 + $60 (his/her original downstroke).
Trading Fees
The same per-contract fee applies when buying or selling a $100 contract.
- Trading fee: $1.00 per $100 contract
- Settlement fee: $1.00 per $100 contract (but settlement fees do not apply to contracts with a settlement value of $0)
- Account Setup: Free
- Electronic Check Setup and Deposit: Free
- Withdrawal (ACH) Free
- Wire Transfer Fee (in): Free
- Wire Transfer Fee (out): $25
- Returned Check: $25
- Insufficient Funds/Contracts Fee: $10
Virtual Mock Trading
HedgeStreet allows traders try the concept by trading free in their simulated trading environment, with a mock account size of $2,500.
Strategic Alliances
On February 22, 2006, CBOE and HedgeStreet announced that they had entered into a strategic alliance for the joint development of new products, sharing of technology services, and marketing and support of HedgeStreet's innovative binary options and futures products, including hedgelets. However, this deal in the end did not come to fruition.
As indicated above, in mid-November 2007, HedgeStreet announced IG Group Holdings plc had agreed to purchase HedgeStreet, Inc., for $6.0 million.
References
- ↑ IG Group to Acquire HedgeStreet, Inc.. HedgeStreet, Inc.. Retrieved on December 27, 2007.
