NADEX

[jackieo79]

You have yet to address the proofs i have given on all your original arguments and are conveniently turning it towards touch.. No problem i get it you don't have any evidence to counter what i have exhibited just theoretical statements that in no way help a trader improve or even disprove accuracy and have yet to combine proof and you wrap it up with insulting comments. I guess that makes you feel big.

I was explaining how I do "i guess to make it palatable" a "target touch" on Nadex. I target a strike i can do this intraday, daily or weekly. I can open close etc.. I don't have to wait until it touches I could close sooner. I can trail my stop up if i would like to further increase my payout. or for the "touch target" i get out when it hits the strike at the price of 47.

I'm not sure why this is so hard to understand. I'm not explaining a discovery just simplicity of pricing and how to take advantage of a target price. Which is what you are also doing on a touch you expect a price to be hit by x time.

You stated "wow what a discovery" yet you stated the following ....its how it works

Originally Posted by jackieo79 View Post
*Delta of a call strike when the price of the underlying market is at the strike of a call option the delta will be 50 if the underlying market is at the strike of a binary the mid price will be 50 (this is not the price of an Vertical spread when ATM)

Yeah, therein lies your problem. You're basing equivalence on a coincident condition.

If you would like me to do a comparison no problem what platform would you like me to look into to compare the touch? So I can make sure I'm looking at what you want to compare.

Your talking about 100/100 barriers and smiles and strips..... great... but whatever what is your point? Where is the application. You have taken down brokers etc.. etc.. I'm sure you can figure out how to make this work to your advantage but obviously your goal is simply to be condescending contradictive and offer no evidence along with your vast option knowledge that offers practical application that a trader can use to either say hey this helps me or it hurts.

absurd.

Touch probability is ~2x expiration probability (2x dirty delta), but you cannot replicate a touch option with a digital. Yes, an atm digital has a fairval of 50/100 regardless of the vol-line, but as OTM they are priced to vola. The convergence to a pick-em market "ATM" on the digital has nothing to do with the payout on a touch option.

A target on the trade = the barrier does not make it a touch option. It's a convenient method to solve for an expectancy absent volatility in pricing of a digital. Of course you still need sufficient realized vol to hit the number. Say the smile is very aggressive and you're in an otm put digital. The 30-delta (flat strip model) is priced at 40/100 (50/100 atm target).... and the pricing reflects the steepness of the smile. You would likely look elsewhere for bear-deltas.

You don't understand path-dependency. And a 30/100 touch is 100/100 at the barrier, so what? It's the nature of a delimited option. Whoa, what a discovery.

And we use vanna-volga (use gamma, not delta) for pricing touch mkts.

Price a touch option at 40D with a week to expiration in real-time and compare the gamma (and speed) and PNL to that of a digital. Don't apologize, just go away.

 

[jackieo79]

Don't apologize just go away really? If you don't like it this is a question about Nadex. You don't like it you go away your the one that keeps coming in with rude comments, showing your option prowless and evidence or substance to back up any claim you have made or counteract the evidence i have shown.

Price a touch option at 40D with a week to expiration in real-time and compare the gamma (and speed) and PNL to that of a digital. Don't apologize, just go away.

 

[jackieo79]

The only way I use short term binaries is for premium collection. Buying or selling a ITM binary I do this around the clock and use stops if my strike is hit I exit to ensure proper risk management. Time passing price in my favor, price flat, price against me slightly i profit on the trade.

I've read your story maybe 100 times over multiple discussion boards . As i understand Oanda left the space because of regulations .
Anyway Nadex offers a wide range of binaries on Indices , FX , and Commodities like energies and Agriculture : weekly , daily , and intraday , however i don't advice anyone to trade the short term binaries .

 

[jackieo79]

So Nadex Commissions where capped at $9.00 and $9.00 if settled ITM or closed before expiration. (No fee if settles OTM)

What would your fees be if you did 1,000 option contracts?

Comparable? Sure... How about an SPY ATM-ish digital for this Friday?If I replicate these things using SPY weekly 175/175.5 call spread, I get 0.42 @ 0.46 on screens (4% wide) if i translate from spot prices of 0.21 @ 0.23. Where does Nadex show the market? If I want to trade these in $100,000 notional, that would be 2,000 contracts (now everyone can plug in their comissions/fees). What fees would Nadex charge?

Data pulled at 1:11 ET. Fees are $0.90 per, on the open and close, with a ticket max of $9.00. http://www.nadex.com/create-account/transaction-costs.html

In response to:


As I responded earlier all exchanges have bid/ask spreads and fees and theirs are comparable. I've seen no evidence to the contrary. I've already been trading them 2 years now. But I understand its not for everyone. To each his own.

http://www.elitetrader.com/vb/showth...=281824&page=3
http://www.elitetrader.com/vb/showth...=281824&page=4

Originally Posted by gkishot View Post
Jackie, if you think you can make money at Nadex, go ahead. But I am sure you won't. Exchange will make money on commissions, MMs on bid/ask spread, but unlike the case of poker game, there is there nothing for you.

 

[jackieo79]

sorry i mean what would your fees be on 2,000 option contracts?

So Nadex Commissions where capped at $9.00 and $9.00 if settled ITM or closed before expiration. (No fee if settles OTM)

What would your fees be if you did 1,000 option contracts?








In response to:


As I responded earlier all exchanges have bid/ask spreads and fees and theirs are comparable. I've seen no evidence to the contrary. I've already been trading them 2 years now. But I understand its not for everyone. To each his own.

http://www.elitetrader.com/vb/showth...=281824&page=3
http://www.elitetrader.com/vb/showth...=281824&page=4

 

[drownpruf]

The only way I use short term binaries is for premium collection. Buying or selling a ITM binary I do this around the clock and use stops if my strike is hit I exit to ensure proper risk management. Time passing price in my favor, price flat, price against me slightly i profit on the trade.

Great answer. Why be knowledgable if all you're doing is selling vola, right?

 

[jackieo79]

No by all means chime in. Thank you for clarifying. Maybe I was not clear and I totally see what you are saying. Please let me clarify as the issue hear is are they poorly priced and what is an accurate pricing model. A vertical yes would be a better comparison on payout risk reward etc.. due to the capped nature of a vertical. But the simplicity of pricing for a binary is the delta of a call.

I am in not comparing a digital tiered nadex binary it to an outright option purchase. I am comparing its price to be the same formula that is used to determine the delta the outright option delta with the same strike and expiration. A delta also has a fixed number 0 to 100% So yes the price of the binary will not exceed 100.

As exhibited here you can see up and down both price ladders the binaries prices corresponds directly with the calls delta. The screenshot or math or whatever is simply to prove that this is an accurate pricing model.

http://content.screencast.com/users/Stephen08540/folders/Jing/media/c5429501-62fd-48a3-bd6e-71b057240ea5/2014-02-04_1823.png

This is not about a single strike move. This is pricing what a binary should be worth right now. If i wanted to price out what a xyz market binary with ##### strike with an expiration of ##.## with x days/hours/minutes remaining to expiration, x distance from the underlying market, and the current IV then i can know with a good precision what the binary should be priced at right now and then determine if it is over or under valued or accurately priced.

Just like in any type of option you trade time, price relation to strike(s), and volatility will change the price over time. The delta will likewise change as time passes, vol changes, and price moves. The binaries price will change likewise the same corresponding amount as time passes, vol changes, and price moves.

I hope that makes sense. Pricing model not P/L comparison.

I will do a comparison of a vertical versus a binary on risk/reward payout benefits, cost, bid ask spread as well for helping to determine which has more advantages or disadvantages in a follow up post.

Jakieo My 2 cents.....

If a binary option has a known potential maximum return known at the the time of purchase (much like a vertical option spread) then it makes no sense comparing it to an out right option purchase. ( This is where i think drownpruf is coming from.)

Your post #23
You dont need maths, screenshots or anything else to understand that by comparing prices and deltas it simply mixes things up.

The binary option may be priced AS the delta of a strike, but as it has a fixed payoff, then it probably has the same payoff as a vertical spread not an outright call.

It looks like all you are doing is betting on the movement of the delta of a single strike option. If this is all it is then dont confuse this with thinking you are betting on the movement of the underlying.

Not to ruffle anyones feathers.....

 

[drownpruf]

But the simplicity of pricing for a binary is the delta of a call.

Simplicity doesn't make it correct. You're still wrong. You cannot disassociate the vertical from the digital simply because you admire the simplicity of your erroneous comparison to a vanilla call. The digital is delimited, capped, just as the vertical. "sle" is a exotics book runner for banks (formerly) and hedge funds as well as being published in peer-reviewed journals. He's telling you that you're FOS, so stfu and listen. You don't have to know why to accept it.

 

[jackieo79]

I never said simplicity does make it correct. But simplicity does not make it incorrect either. Might want to think on that one as I think you like to make things complex to sound smart. I like to make them simple as possible to make them applicable.

Why must i post the same thing to you posting th same thing over and over again.
I do not compare it to a vanilla call. I compare it to the formula for calculating the delta of a vanilla call. Maybe you missed that part.


The delta is also capped just like the binary.

He did not say i am FOS etc.. speak for yourself...I have no issue with SLE and that is awesome that he has strong experience.

But the fact still remains you can not prove me wrong. Delta of a underlying binary same strike same expiration - with a same strike binary same expiration - are the same approximate formula.

You insist so strongly I am wrong. Well come on it should be simple pull up a underlying option chain with delta and pull up a nadex binary strike ladder and show me....

Prove I am wrong. Find me a weekly binary that's price does not match the binary of a liquid underlying markets call strike beta. Bring it show me how smart you are and that I am wrong. Please do so. I will gladly admit it IF you can find any evidence to the contrary. Quit all your theory and opinion non-sense and provide some counter proof.

You hurl insults and like to say I am wrong but you have yet to offer any counter evidence at all. Not even one single shred.

Simplicity doesn't make it correct. You're still wrong. You cannot disassociate the vertical from the digital simply because you admire the simplicity of your erroneous comparison to a vanilla call. The digital is delimited, capped, just as the vertical. "sle" is a exotics book runner for banks (formerly) and hedge funds as well as being published in peer-reviewed journals. He's telling you that you're FOS, so stfu and listen. You don't have to know why to accept it.

 

[jackieo79]

Again I would expect nothing less than a insult combined with a statement without substance from you.

The very reason (knowledge) I do the short term binaries is to collect on time and potentially price. Get maximum theta decay, combined with high gamma requiring minimal or no price movement. Gamma is the price of your vega so the closer to expiration the higher your gamma and the lower Vol (vega). Therefore vega has more impact on an impact on the options price and the closer you are to expiration the less impact vega has. Therefore I choose the short term binaries to minimize vega impact and capitalize on theta and gamma.

As an example see Vega Decrease on the same strikes on options with less time to expiration. And though IV will be yes somewhat higher closer to the expiration the VEGA is still dramatically lower.

http://screencast.com/t/au2S8jnWQf

Im sure you will have some counter active smart comment with an insult saying I am wrong providing a bunch of jargon but offering no substance to any trader on here helping them learn to trade better nor proving that this strategy is a bad idea.

Great answer. Why be knowledgable if all you're doing is selling vola, right?

in response to...

The only way I use short term binaries is for premium collection. Buying or selling a ITM binary I do this around the clock and use stops if my strike is hit I exit to ensure proper risk management. Time passing price in my favor, price flat, price against me slightly i profit on the trade.