- Review Summary
- How To Use The Trading Platform
- Trading choice
- Bitcoin Call Spreads
- Mobile App
- Call Spreads Payouts
- Withdrawal and Deposit Methods
- Who regulates Nadex?
- Who owns Nadex?
- Trading hours?
- Is Nadex a broker?
- How You Make Money On NADEX
- How Buying And Selling Works
- Opening And Closing
- A Beginners Guide To NADEX
- 1. Options are priced in the 0-100 method
- 2. NADEX binary options trade in “lots” priced by the market
- 3. Strike prices
- Simple Sell Strategies For NADEX Binary Options
Nadex is a fully regulated trading exchange, regulated by the CFTC (Commodity Futures Trading Commission), and is legally permitted to accept US residents as clients. Nadex operate in the US, but form part of the IG Group which is based in London. They offer a real exchange, with both buy and sell positions fully open to traders.
Delivering cutting edge trading tools, and advanced features, Nadex provide a high quality trading experience. The fully documented exchange fee highlights the transparent nature Nadex take to their service. They describe their business as:
“Serving the function of matching buyers and sellers of a contract in an unbiased manner (Nadex does not profit from gains or losses on a trade, rather it simply receives a fully disclosed exchange fee)”
- Nadex Demo Account – Yes (Open free demo account)
- Minimum Deposit – $250
- Minimum trade – $1
- Bonus details – No active bonus scheme at present.
- Mobile App – NadexGo.
- Signals service – No
Nadex offer their clients the following features and benefits:
- Transparent trading costs – Nadex are clear about how they are funded.
- Advanced Charting – The charts and technical analysis tools are among the best in the binary options sector.
- Education – This firm take trader education to the next level. There are regular free webinars not just on how to use the platform, but how to make consistent profit.
How To Use The Trading Platform
Nadex provides a real exchange trading experience. This means traders have the option to buy or sell on both sides of the asset. The trader can also request their own strike price. If another client wants to trade the other side of the option, then it will be opened at that price.
The first choice to be made is the asset to trade. This can be located via the ‘Finder‘ window on the left of the trading platform. Selecting a market opens up the time frames on offer for expiry of the option (times are listed in Eastern Time).
The markets window will refresh once the expiry and asset have been selected. This will display the current price levels that can be traded. Generally, there will be roughly 10 price levels – for example, trading the Nasdaq offers 10 levels. Each level is traded based on whether the closing price (the price at expiry) will be above or below the level shown. The settlement price on Nadex binary options is 0 or 100, so the exchange prices will fluctuate between 0 and 100. 100 represents a positive outcome, (so an asset did finish above or below a certain price) and the option will settle at zero where the option had a negative outcome, so for example where the asset price did not finish above the target price. Remember a trader can buy or sell both a positive outcome, or negative.
Clicking the asset in the market list, or the ‘Bid’ or ‘Offer’ figures – will trigger the trading ticket screen to open. If the bid or offer buttons are clicked, this will result in the ticket opening with the ‘sell’ or ‘buy’ option pre-selected.
The trading ticket confirms expiry time, price level, bid size and the current bid and offer prices. Users then need to click the sell or buy buttons (if not already selected) and confirm the size (investment amount) of the trade. The figures along the bottom of the ticket will highlight the maximum loss and maximum payout based on the scale of trade entered – the ‘max loss’ can be intimidating, but trader can close trades at any time if the price moves against them. Traders can also alter the Price – this is the exchange element of Nadex trading. Traders request a price at a higher or lower level than the current price to wait and discover if their position is ‘matched’.
As each option can be openly traded, clients can close their open trades at any time – so profits can be taken, or losses reduced. The maximum and minimum figures on the ticket represent the two outcomes if the option is left to expire without further trading.
Once the trade is setup as required, traders click the ‘Place Order‘ button. Once matched, it will then appear in the ‘Open positions’ window. If the trade is ‘unmatched’ (either all of it, or partially) it will move into the ‘Working Orders’ screen. Both ‘Open Positions’ and ‘Working Orders’ will update as the order is matched. In addition to these windows, Nadex will also send an email confirmation. Another mail is also sent confirming when an order is settled.
Nadex offer binary trading on forex pairs, commodities (gold, silver etc) and indices, plus certain ‘events’ – a fed fund rate rise for example. There is a full range of price levels for each asset, so if a trader is looking for a quick price move in a particular index, or a longer term trade in a currency pair, Nadex will provide it.
Nadex offer well over 500 contracts to trade at any one time.
Touch brackets are a new type of contract that Nadex have introduced. The contract operates between two ‘brackets’ (a floor price, and a ceiling price). The price moves alongside the actual asset price between these price levels. The attraction of these levels are that they act as a built in risk management tool, no slippage – guaranteed. The cost of opening the trade is the maximum capital put at risk.
The flexible ‘micro lot’ trade sizes mean these contracts can be secured with low capital requirements for novice investors, but scaled up for professional trades to get the maximum out of their leveraged trades.
Bitcoin Call Spreads
The Bitcoin Call Spreads let you trade the price of Bitcoin (based on the trusted TeraBit IndexSM) within a range, between a floor and ceiling price. As the price of bitcoins varies up and down, the Bitcoin Call Spread’s value moves as well, but with limits. If the underlying price of Bitcoin moves up above the ceiling or below the floor, the value of the spread stops moving and remains at its upper or lower limit (depending on whether you are a buyer or seller). In this way, your risk-reward is always limited and remains within a range you define. One limit is your profit target. The other is your guaranteed protection against unlimited losses. The duration of the contract is one week.
Nadex offer one the best, and most complete, mobile trading apps on the market. The application is free, and has been written and optimised for a variety of mobile platforms. The app is called NadexGo
The application operation slick, quick and importantly, contains every feature available on the full website. Account maintenance to charting, everything is there for traders in the trading app.
The layout is clear while still showing all the data a trader needs, making trading very simple. The dealing ticket trading area appears the same as on the full website platform, as it has already been optimised for ease of use.
The NadexGo mobile app includes every feature of the full site, and leads the way in the binary options sector.
Call Spreads Payouts
The payouts at Nadex are not easy to compare to other brokers – other brokers do not offer genuine exchange trading. The binary options will payout depending on the strike level that the trader was able to open the option at. As an example, if a trader brought at 50 and the make up was 100, the payout is effectively 100% (they could have risked $100 for example, and received $200 when the trade settled), but if they brought at 70 and the make up was 100 then the payout dips to around 50% (The amount risked was larger and the profit was less).
Some trading fees apply per lot, up to a set maximum. These charges are transparent (you will know exactly what each trade will incur), and still represent a ‘better value’ trade, than a more traditional option. Full details of Nadex fees are available on their site.
Nadex do not generate a lot of complaints. Traders on occasion struggle with the platform because it is very different to more widely known ‘over the counter’ brokers. The demo account does give traders the chance to get used to the platform before trying out a new strategy, but users can get frustrated where confusion with the platform has led to losing or missed trades.
The education materials supplied by the firm are very good. The platform is unique, and does require specific training material. Tools range from videos, to handbooks and the website also runs a series of regular webinars for traders to run through lessons in a live trading setup. Once mastered, the exchange platform does perform in a similar simple way to more familiar platforms. The fees charged for trading are clear and transparent, and again, do not tend to cause complaints.
The brand is certainly not a scam. Owned and operated by IG Group in London, themselves regulated by the FCA in the UK. The US exchange is overseen and regulated by the CFTC to offer trading to US residents.
The regulation for the firm could not be more strict, and users can login, deposit and trade in absolute confidence.
Withdrawal and Deposit Methods
Nadex allow US residents to fund their accounts via debit cards, ACH transfer of wire transfer. Non-US residents can use debit card, or wire only;
Where a wire transfer is above $5000, Nadex will refund the $20 banking fee into the trading account.
Withdrawals are only available via ACH or wire transfer. Non-US residents can only use wire transfer. The withdrawal options can be found in the ‘Account funding‘ menu within ‘My Accounts‘. ACH transfer withdrawals are free and take roughly 3 to 5 days, while a wire transfer will require a $25 fee to be paid, but is generally processed the next day.
Withdrawal details are not straight forward with Nadex, so it is worth clarifying them well before trying to request a payout. Many of these stages are required due to the CFTC regulations – but delays are a regular problem among traders and their brokers – it is an area to research thoroughly before funding an account. This ensures there are no shocks and traders know exactly what to expect when requesting a withdrawal.
Who regulates Nadex?
Nadex are regulated by the CFTC (US Commodity Futures Trading Commission). This represents one of the strongest levels of regulation in the sector.
Who owns Nadex?
Nadex are owned by the UK based IG Group. They have offices in London, and are listed on the London Stock Exchange. IG Group also operate the UK broker IG Index.
The Nadex website is available 24 hours a day, but assets will only be available to trade based on their own regional trading hours. So London based stocks for example, will only be open for trading during UK trading hours. Likewise, US assets will only be open in US trading hours. Some Forex pairs are traded across the globe and will therefore be open around the clock on week days – but the trade volume will vary at times.
Is Nadex a broker?
NADEX isn’t a binary options broker in the “traditional” sense. NADEX is an exchange and an exchange is where traders can meet to conduct business. They provide the platform, ensure that everything is compliant with CFTC and SEC regulations, contract with a clearing house to process all monies and other duties which are required. Each time you trade you pay a fee, in the case of NADEX that fee varies, but has a maximum limit. The exchange makes its money by facilitating the trade, not when you lose.
This is important as it takes away any conflict of interests that can arise when trading with an EU style broker. NADEX does not care if you win or lose, they charge a small fee per trade (full details on their site) and this is where their profit comes from. Offshore style brokers make money when you lose, it is not in their interest for you to win which is why “account managers”, signals and autotraders offered by a broker are usually scams. What makes NADEX even better, and where the real fun comes in, is who they facilitate your trading with. You are trading against other traders and not the platform which makes the action a lot hotter.
How You Make Money On NADEX
How you make money on NADEX is by buying and selling binary options. These options function just like an EU style binary in some respects and do not in others. On the one hand they can be held until expiration in which case you will lose all or receive the maximum payout. On the other hand they are based on set strike prices and can be bought and sold continuously up to and until the time of expiry.
The biggest difference between them and why they trade differently is how they function. An EU style binary option uses the asset price at the time you make your purchase as the strike price. If price moves up or down from there you will lose or make money, depending on what type of option you bought. A NADEX binary option is based on a set strike price, chosen from a list of possibilities, and can be in or out of the money.
With an EU style option you can trade any amount you want, all you do is enter the number in the trade screen. At NADEX options are sold in lots so, for example, you want to buy EUR/USD at 1.0545 you will buy 1, or 2 or 10 lots, whatever you chose. The price of each lot will depend on the strike, if it is in or out of the money, and to some extent market pressure. The price of the options will run between $0 and $100 dollar, $0 is the minimum payout and $100 is the max. In the money options will cost more naturally, out of the money options will cost less. If, at the time of expiration, the option closes in the money you will receive $100 per lot. If the option closes out of the money you receive $0. Before the option expires the price will vary depending on the price of the underlying asset. The profit you make is the difference between what you pay and what you receive for in the money, $100. Typically, at the money options will cost about $50 which means a return on trading of $50, or 100%, way better than the 70% to 80% you get with EU style binary.
To say that NADEX binary options are a little confusing for new traders is a bit of an understatement. There are some truly major differences between trading these US CFTC regulated binary options and the more traditional spot binaries offered by the European and off-shore brokers. The great news though is that these differences open up whole new avenues for trading and profits that will never be available with other forms of binary trading.
Before we move on to the more intricate details of opening and closing NADEX positions let’s review the specific difference between spot binary and NADEX. Off-shore spot binary options brokers, speaking of the standard high/low digital option trade, have two types of positions; calls and puts. If you are bullish you buy a call, if you are bearish you buy a put and in both cases you are buying from the broker. If you win the broker pays you, if you lose the broker keeps the money. At no time are you able to sell an option other than in an Early Out situation. At NADEX they only have one type of position, called a lot, and it can be bought or sold. If you are bullish you buy it, if you are bearish you sell it.
How Buying And Selling Works
This is how it works. NADEX lots are listed at different strike prices, some are In-The-Money, some are Out-of-the-Money and one or two will be Near- or At-the-Money. For this discussion I will focus solely on the At-The-Money strike for simplicity and because both the long (buy, call, bullish) and short (sell, put, bearish) positions will cost about $50. The thing to remember is that in both cases, buying or selling, you are doing so to open a position. So, buying a NADEX lot is the same thing as buying an EU style call, selling a NADEX lot is the same thing, almost, as buying an EU style put. The difference is that with NADEX you SOLD TO OPEN, not Buy To Open, the bearish position so you get a CREDIT for doing so.
Look in the example below. In this chart of NADEX strikes for the 1PM expiry of EUR/USD the 1.0868 strike is At The Money. If you want to buy a long position, a call, it will cost you the offer price. This is the price at which another trader is OFFERING TO SELL. If you buy it at $56.00 and the asset prices closes above the strike price, In The Money, your max profit will be $44 which is the difference between what you paid and the max payout at expiration, $100. If you want to sell a short position, enter a put, you will receive the bid price. This is the price at which another trader is BIDDING TO BUY the option, in this case $50. This means that you will receive a credit of $50 into your account and will get to keep it if the asset price closes Out Of The Money (the other traders loses, you win). Your risk is if the asset price closes In The Money, if this happens you are responsible for paying out the $100 max payout but not to worry, since you took in $50 already it really only cost you $50 so your risk is $50.
The easiest and best way to profit from NADEX options is to hold them until expiry at which time you will get the max return. However, some times you may want to close early in order to lock in profits or cut losses and this is another area where some confusion can come in.
What you have to remember is that you’ve already OPENED a position, now you need to close it. If you’ve bought a long position, a call (buy to open), then to close it you SELL TO CLOSE and receive the bid price. If that price is above the price you paid for the option then you will make a profit. If you’ve sold a short position, sold to open, then in order to close the it you will need to BUY TO CLOSE.
Opening And Closing
The key is remembering two things. First, there is only one kind of position that you can either buy or sell to open. The second thing to remember is that in order to close your position you must do the OPPOSITE of what you did to open it. If you buy to open you sell to close, if you sell to open you sell to close.
A Beginners Guide To NADEX
The biggest complaint about NADEX is that it isn’t easy. Granted, NADEX is not as easy as trading at an offshore, EU or CySEC style digital binary options broker. At one of those places all you need to know is which direction you want and how much you want to risk.
When you hit enter the price of the underlying asset at that time is your strike price, if the asset prices moves in the right direction from there you are a winner and paid the percentage indicated when you bought the option. At NADEX it isn’t quite so simple but believe me when I say that it is far superior to any other form of binary trading I know.
There are three things you need to know when it comes to trading at NADEX:
1. Options are priced in the 0-100 method
Because they are binary in nature there are only two possible outcomes at expiry, either $0 or $100. If the option closes out of the money you get $0, if it closes in the money you get $100. The detail that makes trading work is that while the option is live, before it expires, the value will fluctuate between $0 and $100 based on the movement of the underlying asset and market pressures. If the option is out of the money it will cost less, if it is in the money it will cost more.
Your profit at expiry is the difference between what you pay and what you receive. If you pay $45 and receive $100 because the option expired in the money you profit $55 or 122%. Please note that I said 122%, far better returns than what you will find elsewhere. What is important to note, you do not have to hold NADEX options until expiry, they can be bought or sold at any time. If your trade moves in the money and your option shows a profit you can sell but you will probably not get the maximum return.
2. NADEX binary options trade in “lots” priced by the market
Things affecting price include the price of the asset, the strike price of the option and the amount of time until expiry. At an offshore broker there is no market pressure affecting prices, if you wanted to trade $500 you enter $500 in the amount box click enter and the trade is done, you have one position for $500. With the “lot system” if you want to trade $500 and 1(one) lot cost $50 you would need to buy 10(ten) of them. If the lot cost $65 you would only be able to buy 7(seven) without going over your limit.
3. Strike prices
Each asset will have a number of listed expiries with a number of available strike prices for each. The strike price is the price level at which the option will be in/out of the money. When it comes to pricing the At-the-money options will always trade near $50 which shows a roughly 50/50 chance for the option to move up or down. When the strike price is in-the-money, that is the asset price has already surpassed the strike price, it will cost more because there is a higher chance for it to close profitably. The strikes will get more expensive the deeper in-the-money you go until they are fully priced. When the strike price is out of the money, that is the asset price is below the strike price, it will cost less than $50 and will get cheaper the further OTM you go until they are completely worthless. In terms of standard, directional style trading, an ITM or ATM option is a less risky trade while an OTM option is more risky. Of course, with a strong signal an OTM option that costs only $30 or $40 will return 150% to 230%.
Simple Sell Strategies For NADEX Binary Options
NADEX binary options aren’t like EU style spot binary, you can actually sell them and get paid. Read on to find out how you can use these simple sell strategies.
Let’s first reiterate that NADEX options are sold in lots, option strikes are preset with some in the money and some out of the money, and that all options are worth either $0 or $100 at expiration. During the life of the option, the time between when it first becomes available to trade and expiration time, the price will fluctuate between $0 and $100 depending on strike and the movement of the underlying asset. In the case of a bullish position, a position in which you bought the strike in the belief that prices will move higher, your profit will be the difference between the price you pay for the position and the amount you are returned at expiry, either $0 or $100.
If the option expires out of the money and you get $0 you suffer a loss, the cost of the position. If the option expires in the money you get $100 and suffer a profit, $100 minus the cost of the option. If the option was purchased when at the money it probably cost about $50 and returned about $50, or 100%.
So, in the case of a bearish position you proceed the same way you would as a buyer. You “sell” the strike, meaning you pay the other side of the position from the buyer you’re matched up with. If the buyer put up $40, you would pay $60, which is $100 minus $40. The most you can lose is that $60. You profit if the option expires at zero, whereas the buyer profits if it expires at $100. In this case, if the binary expired worthless, you would get back your $60 plus the buyer’s $40, for a payout of $100.
Remember, ATM money options cost about $50 per lot. If you sell one for $50 and it closes in the money you a have to pay out $100, which is $50 of your money and $50 you received in option premium. If the option closes out of the money, which is what you want, you get to keep the premium (the owner of the option holds a worthless contract, you are required to pay nothing) and profit that amount.
- Buying At NADEX/Bullish Position – you buy the option strike, paying the ask price, and profit the difference between the cost of the option and $100. Your risk is the price of the option.
- Selling At NADEX/Bearish Position – you sell the option strike, receiving the bid price, and profit that amount if the option closes out of the money. Your risk is the difference between what you receive and $100.
The mechanics of buying and selling options at NADEX opens up quite a few possibilities. The simplest and perhaps most effective for directional binary options trades are hedging strategies. Hedging is when you use one position to offset the cost of another, or to help maximize profits before expiry. Think about this. You take a signal on a bullish trade and buy an ATM the option for $50. The underlying asset moves up to your next resistance target and stalls out but you are able to sell the next higher strike for $50 at the same time. This means that your total cost is now $0 dollars, all you have to do is wait until expiry. If the asset remains between the two strikes great, you make maximum return, if not you lose nothing.
More advanced traders can target non-directional strategies using sold options. These strategies work best in ranging markets, when asset prices are trending lower or when they are capped by resistance. One method is to target out of the money strikes that can be sold for a credit with a high likelihood of closing out of the money. Take for example this trade set up for the S&P 500. Prices are trending lower in the near term with two strike prices close enough to the money to have value, but far enough out to be fairly safe relative to price action. Please take note, these are already in the money so there is no need for ANY price movement. Sell these for a combined credit of $31.50, free and clear and all you have to do is hold them for 5 minutes.
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