This bet lets you set a barrier level above or below which the index must stand on the expiry date for you to win the payout. You would buy a bear bet if you believe the underlying security/index/currency pair will be lower than a certain level (also referred to as the barrier level) on the maturity date.
Example: [Pays 100 if the FTSE closes lower than X on date T]
Bear Bet (also referred to as Bear Contract) You would buy a bear bet if you believe the underlying security/index/currency pair will be lower than a certain level (also referred to as the barrier level) on the maturity date. (also referred to as the expiry date). Again, if you are unfortunate and the market is exactly at your target level on the expiry date you will lose the bet.
Example: The USD/JPY is currently quoted at 119. You have a hunch that the USD/JPY is about to slip down to a level lower than 118.5 in the very near future. So you price this bet: I wish to win «USD» «1000» if in «10» days time, the «USD/JPY» is lower than 118.5. After inputting the required parameters and «calculating» the cost of the bet, our pricing engine returns you a price of USD460. You are satisfied with these pricing terms and click on «Buy Bet». If, on the expiry date, the USD/JPY closes lower than 118.5 you will win the bet and receive a total payout of USD1000. If your prediction proves wrong and the USD/JPY rallies (ie rises) to 120 instead of dropping on the expiry date, then you will lose your initial investment of USD460. Again, similarly as in the case of a bull bet if the USD/JPY falls to 117 within 7 days of buying the bet but is quoted at 119.5 on the closing day of the expiry date then you will still lose your bet.
Note In every foreign exchange transaction a trader is simultaneously buying one currency and selling another. These two currencies make up a currency pair. In the example above the foreign currency exchange rate of the dollar versus the yen was 119 i.e. USD/JPY = 119. If the USD/JPY slips to 118.5, then this means that the USD has lost ground to the JPY.
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