Nadex Forex Bull Spreads

(Read the post after this one first Agent, I realized you are talking about dailies and I am talking hourly)

Yes the payout does adjust as the price moves but what Nadex does is say at 10:00 A.M. ET they put out a price 1.3100. You either say by expiry it will be above or below and it will be approx. 50/50 if spot is at this price. Now at 10:15 it moves to 1.3120. With Nadex your stuck with above/below 1.3100 or above/below 1.3200. So lets say in this scenario you are sure that it will not break 1.3150, with Nadex all you could do is say below 1.3200 but the R/R would be bad since it is already below 1.3200. Probably risk 80 to make 20.

On the others the price is constantly moving, with spot. At 10:15 your options would be above/below 1.3120. If you are convinced of a move to 1.3150 and then fall, you can wait for 1.3150, place the trade below 1.3150 and then as long as it is below 1.3150 at expiry you win.

For me all I use is two moving averages and one or two probabilities. I trade when it gets to some moving average I believe it will reverse on and I place the trade at that price when it reaches it. Then all I need is it to reverse 1 pip at expiry and I'm in the money. It can move against me as far as it wants without stopping me out, as long as by expiry it comes back to at least one pip in my favor, I'm in the money. I countertrend for the most part but you could trend trade it too, if you think once it hits some price it will fly in that same direction just wait for your price and place the trade in the same direction it is moving, as long as at expiry you were right by 1 pip you're in the money.

Optionbit has a demo so you could see what I'm talking about or you can just go on their site and watch it and you'll see how it is different. The demo when I used it was good for one whole day! So if you're going to get it be ready to test it quickly. None of the others have demos that I am aware of.

I read your post again and I think some of the confusion is in the fact that I think you are talking daily binaries and I am talking about hourly. The price does move as you say for the dailies. The 50/50 slides around with the spot price as it moves and the other ranges follow it. I do not usually trade the dailies especially close to the expiry, I tried it a few times and it really jumps around at the expiry time, I don't know if some other factor drives this jumping around around 3:00 P.M. but it got me a few times and I stopped doing it. I pretty much only trade hourly binaries and the way the price works for those is how I was talking about in the previous post.

Oh I see what you mean. I haven't done a lot of the 2 hour binaries. I forgot that they have such big 100-pip gaps between them. They must do that for the same reason that they have such big price gaps on bull spreads: they don't want to be paying out to everyone that can see price isn't moving for the next hour or two.

Price discrepancy today on EUR/USD bull spreads is 50 pips .

On which one? is the price on that contract way beyond the ceiling/floor?

7am-3pm. Looked at it right when it opened. Price was right at floor/ceiling of two contracts.

That will happen near the ceiling/floors for sure. I will try to give you an example of how that is a good and bad thing, it just depends on what trade you are in.

I looked at one of the two hour bulls at about 9:00 A.M ET and this is how it was laid out: (the current spot price was 1.3000)

(contract) (price)
1.2970 - 1.3070 1.3010 1.3012
1.2920 - 1.3020 1.3000 1.3002
1.2870 - 1.2970 1.2966 1.2968

If I were just now going to enter this trade long lets say, I would take the middle contract, no spread other than the two pips buy/ask and the margin would be $80. So I can trade $1 pips with $80 margin, that is the advantage at this point over a spot trade, but that's it. There is always one of the contracts that has no "extra" spread and these are the ones I take if I am going to take them most of the time...unless... look at it again, if you thought short here, you could take that bottom contract, put up $4 in margin and this is also your maximium loss amount and ride it out. You could potentially make $100 for putting up $4. Now the price would have to move below 1.2970 to start getting into profit but on an NFP day like today, that is usually no problem with it spiking all over the place. The timing/price/volitility all has to be right, it is not a free ride for sure. Also trying to trade these like spot in fast markets I don't think is a good idea, it is not set up for news/high speed trading.

Another benefit to this is lets say the price was actually 1.3020 twenty minutes ago, the top contract would have no spread as it is near the middle and you take it long. Now it moved against you to 1.3000 but the contract price is 1.3010, in a regular spot position you would be down 20 pips, with this contract you are only down 10.

If you want to avoid the wierd ceiling/floor spreads just always take the trades on the contracts that have no spread. You will have to put up alot less money to trade dollar pips than with any other U.S. broker at least.

More great information!
I might mess around with giving up the first 20 or 30 pips in profit in order to have low risk. That is a good alternative to dealing directly with the big price discrepancies/spreads. I think I did put in a few limit orders that worked out in that fashion. It's a little frustrating to have to wait for price to move way past a ceiling/floor just to make the risk low; wastes a lot of time in a contract that only lasts a few hours.

I did notice (and mention a while ago) the way price can be held above a floor (or below a ceiling) to keep the entry point from being too cheap.
It does seem like that could be beneficial in reducing drawdown, but it seems like Nadex always requotes the price back to reality, eventually leaving you with the full loss.

I'm currently looking into regular options strategies to see how they compare to Nadex.

Yes the price will time decay back to reality and at expiry it will also be back at the full floor/ceiling so this type of situation is only beneficial if you are convinced your position is done and want to get out without losing as much as you normally would.

Seeing a lot of similarities between Nadex products and regular options. Started a new thread:
http://www.forexfactory.com/showthread.php?t=275676

Nadex is now open 23 hours. They only close between 5 and 6pm eastern time. So you can trade these anytime. I trade during US session because simply that's when i wake up. During this session wait until there is a break from a R or S...& this can be done with fibs...which is what i like to use; or use trendlines, channels, triangles or classic S&R or whatever and if price breaks through these then that is the key price you will use until expiry. In other words this is the price you will buy or sell until expiry. These breaks are signaling were price is going for the session. Of course this is not risk free. Be careful with news & all the hocus pocus that goes on. But using this strategy is pretty solid. But you have to be patient & wait for those breaks.

Hey all, sorry I have been away on a work project for a bit and haven't had much of a chance to get on this thread or for that matter trade at all. Actually, today was my first day back in the market, but had to see what things looked like around GDP figures.

Looks like I missed some good conversations taking place.

Going back in the thread a bit, I have to agree that the 100 pip intervals in strike prices is way, way, way too much for that short-term type of binary trade. No opportunity at all! Hopefully, they start listing them like their parent company does, with 10 or 20 pip intervals. Then it would be very tradable. Right now it seems like a bit of a crap shoot (by the way, I think the dailies are still good, but I only trade them early in the US session (I attached a screen shot of a spread and binary on the S&P I have currently working but may just close out soon).

For Agent6488 and JohnnyGuru I am curious about your recent posts as far as the time decay. The spreads do have time decay, but that only impacts where the price of the spread is compared to the underlying and doesn't have anything to do with the floor or ceiling unless price is outside the range of the effective spread (example if at expiration EUR/USD is at 1.3213, and the range was 1.3100 1.3200, then yes, this would expire at the ceiling). If the range though was 1.3200 - 1.3300 just about expiration, the spread price would be trading near 1.3213. If it was early in the contract though, you would probably have to buy near 1.3223 (depending on volatility, time,etc.). Also, one quick note, Nadex never quotes anything. They are simply an exchange and all settlements are based on the underlying. any movement in the binary or spread is up to the other participants and market makers.

By the way, the attached is the one open from this morning. This is just to give an example of the strategy I referred to in an earlier post about selling the well in the money binary and buying the well out of the money just looking for movement one direction or the other. The reason I did this one today was because I was expecting some movement out of the GDP report. By they way, they do not always work out like this, and just like any trading no exchange just hands out money. The first 2 hours after the report, I was still down big on these and it has just recently come around (thank you pre-weekend profit taking). BTW, probably taking profit on at least 7 of the 10 profitable binary and spread positions and then seeing were the rest expire.

Have a great weekend all!

I just opened a demo account and plan to give it a try.

With all of the toying with prices during a live option, Nadex still has to meddle with the expiration value of the option.

From the Nadex website:


So, if I'm understanding this correctly, the actual closing price in the market does not count. It's the price based on Nadex's calculations which does.

Well, over the past few hours I've made a total of $1610 on two bull call spreads consisting of 10 contracts each. I'm still learning the platform. I'm all for low leverage when the opportunity presents itself. Oh, how I miss those 400:1 days in spot forex.

( Update: I think I may have misinterpreted the payout, but there was a profit.)

It appears that the floor and ceiling prices for the daily bull spreads are chosen so that the margin requirements reflect the margin requirements in the spot forex market.

Can somoene who has traded bull spreads in a live account with Nadex comment on how quick the orders are filled (both manual and limit)?

I had limit selll on a EUR/USD bull spread (10 contracts) kick in about 15mins ago which expires at the top of the hour. Presently up $190. Hopefully I'm still in the money when it expires because there are still some things I need to learn about how things work.

With the bull spread trade I'm in, I can close out now and take the profit. If this was a standard binary option, I would have to wait until it expires at the top of the hour before I can bank the profit. Is this correct?

(Up $250 by the way.)

The option expired and my total profit (after fees) was $183.

(By the way, what happened to Yoda Glenn)?