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Oanda Box Options

  • #41
  • Quote
  • Jun 2, 2007 12:50am Jun 2, 2007 12:50am
Quoting merlin
great breakdown capitalist! buying both boxes is the easy way to see what a joke these "options" are. its like a selling a butterfly spread where the max payout is less than the cost LOL. like i said earlier in the thread, its a one-sided market, which is not really a market at all. its a fixed odds scenario, house rules. until you can sell these contracts freely (to other traders) they shouldnt be bothered with.
Hi Merlin! I've been meaning to complement you on your site. I've been a long-time lurker.
  • #42
  • Quote
  • Nov 15, 2009 1:02am Nov 15, 2009 1:02am
Ok, so this is a really old thread, but I thought I'd stir it up again.

Shall we call then "Boptions" for fun?

So you've all made it clear that there's no point in trying to play boptions directly for profit, but what about using them in one of the common ways that regular options are used, i.e. as insurance on a trade.

I haven't looked into how much they cost and how much they pay or any of the details, but I'm just wondering if anyone has tried using them in the following way:

You have a regular trade. Let's say it's a long trade. You have a stop loss below your trade. You also place a boption below the trade near the stop loss. Hmmm... we could call that a "stoption." :nerd:

  1. If price never hits your stoption, fine. You simply lose the premium you've paid for it, but now you're sitting on a profitable trade.
  2. If price hits your stoption, you lose on the trade because it hit your stop, but you gain from the boption. There's the insurance.


Now why not just use a stop loss? Well I don't know, maybe a regular stop loss is more reasonable. But maybe a stop loss in conjunction with a boption will allow you to leverage your trade in an interesting way. For example, let's say you're trading 10,000 units so a move of 1 pip = $1. Let's say you place your stop 100 pips below your entry.

Now if price hits your stoption, you lose $100 on the trade, but make $100 on the boption (for which you paid $60, or something like that), so the total loss is $60.

Again, I'm just making up these numbers, I don't know any of the details about how much they cost and how much they pay, but let's just use this as an example. Your total risk is $60. With a normal trade and a stop loss at a distance of 100 pips away from your entry, you would have to trade 6,000 units to have a risk of $60 ($0.60 per pip). With the stoption, you can trade 67% larger, you can trade a position of 10,000 units (instead of 6,000) and still only have $60 risk.

So if you lose, it's the same: You lose $60. But if you catch a good trend, maybe it moves 200 pips in your direction. Then you would make $200 ($1 per pip) - $60 (the premium of the boption). So your total gain is $140. If you had done a regular trade of 6000 units ($0.60 per pip to make sure your 100-pip SL amounts to only $60), then your gain would be $120 (200*0.60). So that makes the stoption seem kind of cool.

But of course, there is a break-even point. If the trend doesn't move far enough, you'll make less money with the boption trade than with a regular trade. The break-even point occurs when the profitable trade moves enough pips so that the higher profit per pip makes up for the boption premium, i.e.

premium*10,000 = (boption trade size - regular trade size)*pips

(Solve the above for pips)
In our case:
$60*10,000 = (10,000 - 6,000)*pips
pips = 150.
So as long as the profitable trade moves at least 150 pips, it will have been worth it to use a larger trade size with a stoption instead of a smaller trade size with a regular stop.

Has anyone tried this? Does it turn out to be not really worth it when you use real numbers?

  • #43
  • Quote
  • Nov 15, 2009 1:35am Nov 15, 2009 1:35am
Quoting mathematician
Has anyone tried this? Does it turn out to be not really worth it when you use real numbers?
Yes I use box options to manage long term swing positions. This particular strategy is exposure based that profits from ranges and tries to catch trends so the duration is long. I find the four week prices are usually reasonable and use them to protect positions that become exposed.

I'm not an options guru but in my experience the only short term edge I have seen and profited from is betting on increased vol in the short term based on upcoming news events. As far as I can tell their pricing doesn't usually price them in until about 48 hours before the event. Four days out on low vol usually sees good results on short duration boxes. However I don't do this often as it is what it is... a gamble.
grist for the mill
  • #44
  • Quote
  • Nov 16, 2009 9:42am Nov 16, 2009 9:42am
Quoting JackJones
Yes I use box options to manage long term swing positions. This particular strategy is exposure based that profits from ranges and tries to catch trends so the duration is long. I find the four week prices are usually reasonable and use them to protect positions that become exposed.

I'm not an options guru but in my experience the only short term edge I have seen and profited from is betting on increased vol in the short term based on upcoming news events. As far as I can tell their pricing doesn't usually price them in until about 48 hours...
So do you use them to increase your trade size? In other words, do you use them to trade bigger because you know that in the worst case, they are giving you some protection? Do you use them like a "stoption" I described in the last post?
  • #45
  • Quote
  • Nov 17, 2009 1:47am Nov 17, 2009 1:47am
Quoting mathematician
So do you use them to increase your trade size? In other words, do you use them to trade bigger because you know that in the worst case, they are giving you some protection? Do you use them like a "stoption" I described in the last post?
I use them once a have a position in profit, 100+ pips... I put them incase of a retrace and my B/E stops get hit. While they don't cover the profit that was nulled they give a return which helps psychologically. However it becomes tricky because if a position continues in my favour I then have to start managing and adjusting for the box prices that I've now lost.

Depends on trade size. If the initial is big then I might put a box/stop from the start but generally I like to have a position before I start to pay for boxes.
grist for the mill
  • #46
  • Quote
  • Nov 19, 2009 1:58pm Nov 19, 2009 1:58pm
I’m more of an intraday trader, and if I can I do some scalping
Now I’m with ACM that allows scalping, so I do it more often but when I started I was with oanda and those cheaters all they did was freeze my platform after 5 min of scalping
  • #47
  • Quote
  • Nov 21, 2009 6:52am Nov 21, 2009 6:52am
Quoting renasdad
I will try to explain the best I can.

On the Oanda platform, you see a chart....


the box would be the DNT ?
  • #48
  • Quote
  • Jun 2, 2011 5:43pm Jun 2, 2011 5:43pm
  •  apt
  • | Joined Oct 2010 | Status: All your cookies are belong to me. | 1,114 Posts
I'm a little late to this thread, but using the boxes as an indicator is a fantastic idea. Would require a lot of tweaking, as far as ideal trading time, and box size - in regards to time size and pip size.

Would require A LOT of backtesting but it could be worth it.

Comes out to be really simple, you draw 2 hit boxes, above and below within a time in the near future. The box with the smallest percentage payout from Oanda is the box that Oanda believes will attract the price during that time frame.

Your next step is to simply just take a trade in that direction.
  • #49
  • Quote
  • Jun 2, 2011 6:58pm Jun 2, 2011 6:58pm
  •  apt
  • | Joined Oct 2010 | Status: All your cookies are belong to me. | 1,114 Posts
Would it be possible to program something that created boxes for you?

If you create a hit box, about 100 pips in length, 15 minutes ahead you're getting about .0075 % return on your investment.

If you constantly created these boxes every 15 minutes, you would "basically" have a no-fail system.

As hard as I am looking, I can't find many M15 (EUR/USD) candles that move 51 pips outside of the price point 15 minutes later.

And of course, the idea could be tweaked to less volatile time frames. I'm getting 0.0075% return at 6:52 PM EST, which giving very low volatility at the moment, and usually does.

Regardless, if this were able to be created and for example 200 trades were executed a day at the $2,000 max box purchase price, we're looking at around $300 a day given that you are receiving $1.50 return.
  • #50
  • Quote
  • Jun 2, 2011 7:48pm Jun 2, 2011 7:48pm
Quoting apt
Would it be possible to program something that created boxes for you?

If you create a hit box, about 100 pips in length, 15 minutes ahead you're getting about .0075 % return on your investment.

If you constantly created these boxes every 15 minutes, you would "basically" have a no-fail system.

As hard as I am looking, I can't find many M15 (EUR/USD) candles that move 51 pips outside of the price point 15 minutes later.

And of course, the idea could be tweaked to less volatile time frames. I'm getting 0.0075% return at 6:52 PM EST, which...
However, would you not lose the whole $2000 with one single loss? R:R not all that good in my opinion.
  • #51
  • Quote
  • Jun 11, 2011 9:39am Jun 11, 2011 9:39am
Quoting apt
I'm a little late to this thread, but using the boxes as an indicator is a fantastic idea. Would require a lot of tweaking, as far as ideal trading time, and box size - in regards to time size and pip size.

Would require A LOT of backtesting but it could be worth it.

Comes out to be really simple, you draw 2 hit boxes, above and below within a time in the near future. The box with the smallest percentage payout from Oanda is the box that Oanda believes will attract the price during that time frame.

Your next step is to simply just take...



What if the differences in payout / directional probabilities only differ slightly ? I'm pretty sure that this is usually the case.

Would you want to go long simply because the probability of price rising derived from the box is 55-60 % ? I wouldn't pull the trigger with odds that low.


Used in conjunction with your own stuff, I could see some value in this approach...but on its own, not.
  • #52
  • Quote
  • Last Post: Jun 11, 2011 10:29am Jun 11, 2011 10:29am
There is no directional bias in oanda's boxoptions. If you draw a box 200 pips above and a box 200 pips below px it will have the same premium (marginally different due to carry on longer term options for some pairs). The price of a boxoption is a simple function of volatility and time. Oanda's house edge is applied by a reduction in payout/increase in box price (based on fair value) - in the same way like there is a spread for spot trading.
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