NADEX

[SIUYA]

A bet if you want it to be... i prefer to trade...

I think of opening a business, a trade, or most business decisions as a bet, but sure ....call it a trade/bet/wager/investment/business decision. It was not meant to offend.

(chart based trading, expected ranges based on vol as i am not holding to expiration]
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Yes at expiration they are 0 or 1.00 but don't hold till then not wise...

are these cash settled.....why not simply hold to expiry, as opposed to exit especially if settlement is easy, and you are trading very close to it - are the costs that much different? or are there other hidden issues?

So understanding delta, gamma, theta impact on delta, vol impact on delta etc.. helps one better grasp the pricing model. Though honestly you don't have to grasp it to trade them effectively.
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if market is at 1000
i buy at 980 strike with 2 hours till expiration

the market can stay flat - i profit
the marekt can move up i profit
the market can move down and settle 1/10th of a tick above 980 and i profit
the market could fly down and move back up an settle 1/10th of a tick above 980 i profit
the market could fly down and say down i lose to limit risk the market cold move down and i exit atm to minimize risk and lose

so i could be right about price, wrong about price, right about time, wrong about time, right about price and time, only if i am wrong enough about BOTH price and time do i lose on the trade

it does not have to be complex though - keep it simple that is what works... and exit before expiration!

I agree - keeping it simple is easiest....I guess that is one of the confusing issues of this whole thread - you dont need to worry about all the option maths (unless you are arbing it, or spreading it, or similar), and which is why i wanted to get to the crux of what it is you are trading.....the delta of a strike, rather than the arguments of replication, equivalent payoffs etc.

IMHO - All the rest is unnecessary and which is why i summed it up as a bet against the delta - on expiry (as you say) its all 0 or 100. - So ITM longs are good, OTM shorts are good. Period

thanks for the info,
it sounds like something I will look into (though my skeptical old mind says, costs, and spreads will be the issue here. - Although maybe everything these days is so automated, old school will work again!)

 

[drownpruf]

I opened a demo on Feb4. I'll post the outcome before the 14 days expire on the demo. Obviously there would be some interest in trading inside the quote on the production platform, but how often does that occur? The deeps seem to be arbitrarily 5-wide on the system.

 

[jackieo79]

You can put a bid/offer inside the quote. Of course demo or live another trader would have to take it. Either way to be blunt. I trade at the market so long as it works with my risk/reward plan.. Well and it works

Here are some of the results just from trading this mornings NFP report. Notice all these trades where entered this morning to take advantage of NFP before the verticals on CBOE etc.. where available to trade. Easily overcame the bid/ask spread... Profits where quite a bit larger on many of these positions and others but it just shows the bid/ask spread is not hard to overcome.

I opened a demo on Feb4. I'll post the outcome before the 14 days expire on the demo. Obviously there would be some interest in trading inside the quote on the production platform, but how often does that occur? The deeps seem to be arbitrarily 5-wide on the system.

 

[jackieo79]

No offense taken... just many do "bet them" ie without a plan of entering exiting etc.

Yes they are cash settled. Holding to expiry is part of that "betting" part... Its one thing to say a price will get here. Its another thing to say the price will stay here until expiration. "Touch/Target" Versus Expire - touch is much easier to project than expiration. So lock in the profit and don't let a profitable trade become a losing trade.

The cost is not that much different no - .90 cap $9.00 whether you exit or hold to expiration.
Obviously holding to expiratin it is settled so there is no bid/ask spread paid to exit so that saves you some cash but i don't worry about saving a few bucks when im up say $20, $40 $80 etc.. on a single contract. I would rather keep that profit than risk giving it all back.

Plus now my capital (the risk put up to do the trade... is free for me to put into additional trades. Its easy as a trader to hold on for that last few bucks completely ignoring the fact that you are tying up capital (risk capital) that could be better used in another trade that could make you another $30 etc.. per contract.

I think of opening a business, a trade, or most business decisions as a bet, but sure ....call it a trade/bet/wager/investment/business decision. It was not meant to offend.

Correct i am changing the change in the delta of a strike... this is the simplest method to grasp and is very practical

Cost is low .90 a contract capped at $9.00 - spreads are not an issue they move plenty fast enough

A few more examples from this morning

(save as above just more updated screenshot)

Last ones just now closing...not a bad Friday

just hop in demo learn watch mess up - ask questions will be glad to offer any input have that may help

are these cash settled.....why not simply hold to expiry, as opposed to exit especially if settlement is easy, and you are trading very close to it - are the costs that much different? or are there other hidden issues?



I agree - keeping it simple is easiest....I guess that is one of the confusing issues of this whole thread - you dont need to worry about all the option maths (unless you are arbing it, or spreading it, or similar), and which is why i wanted to get to the crux of what it is you are trading.....the delta of a strike, rather than the arguments of replication, equivalent payoffs etc.

IMHO - All the rest is unnecessary and which is why i summed it up as a bet against the delta - on expiry (as you say) its all 0 or 100. - So ITM longs are good, OTM shorts are good. Period

thanks for the info,
it sounds like something I will look into (though my skeptical old mind says, costs, and spreads will be the issue here. - Although maybe everything these days is so automated, old school will work again!)

 

[drownpruf]

are these cash settled.....why not simply hold to expiry, as opposed to exit especially if settlement is easy, and you are trading very close to it - are the costs that much different? or are there other hidden issues?

They're cash-settled and no costs associated with allowing them to expire if OTM. ITM is at least $0.90/contract to exercise (to cash).

 

[sle]

So, the crucial question is - where does the edge come from? The main reason to trade options is to take advantage of mispriced convexity (in a variety of ways). What sort of edge can one achieve in binary betting? is it all short-dated distributional bets?

 

[drownpruf]

is it all short-dated distributional bets?

Well, yeah. He does 'em because they're dailies.

 

[sle]

Well, yeah. He does 'em because they're dailies.

Hmm. I don't have access to their site - what do the prices look like for daily OTM-sh stuff (e.g. a digital strip of -1%, -2%, -3%, -4% and -5% strikes)?

 

[drownpruf]

Hmm. I don't have access to their site - what do the prices look like for daily OTM-sh stuff (e.g. a digital strip of -1%, -2%, -3%, -4% and -5% strikes)?

It won't be of much use until Monday when they list the weeklies for Feb14 exp.

 

[jackieo79]

The main reason for me to trade anything is to make money trading on my schedule (night, early am, or day time). I trade Nadex binaries - (mentioning nadex as not all binaries are created equally) as they do they allow me to make money trading on my schedule. In addition, they allow me the defined risk I like one obtains when trading options. I like the speed of movement, the advantage of intraday time decay, being able to go both long and short to strangle etc for news trades...as exhibited in multiple trades screenshots live trades etc.. posted recently. Whether it be In The Money nadex binaries for premium collection or OTM binaries for strangles or nadex spread for hedging futures/forex directional trades. I just want to keep it simple.

Regarding mispriced convexity, skews, equivalency, replication providing additional edges.. etc.. I will leave that to you guys. Not saying its not all valid etc... but I just trade what works. I will in no way challenge the more you use the math the more of an edge you can get and that it could help you with developing much more advanced strategies. But I personally prefer to just keep it simple. More concerned with the application and profitability than I am with the advanced math.

I don't just trade the dailies, I trade the intraday's, dailies, and sometimes the weeklies (mainly on thursday/friday).

I prefer not to bet but trade with defined entries and exits based on chart movement. ON nadex binaries i can exit many types of binaries you can't. I consider having to hold to expiration without a choice betting.

So, the crucial question is - where does the edge come from? The main reason to trade options is to take advantage of mispriced convexity (in a variety of ways). What sort of edge can one achieve in binary betting? is it all short-dated distributional bets?