Help to understand BUY Binary being Profitable when market is below strike?

#1

My question for this Iron Butterfly is: How the BUY Binary produced Profit? I think I know why but I would like to have confirmation of what happened. I believe that it has something to do with the “Greeks” of options which I have heard about, but don’t know enough to explain what happened to the BUY Binary making profit.

I setup an Iron Butterfly for a News Trade 8:30am EST 8/18/17 (CAD various events) I could not find the prices for the Buy and Sell Binaries in the intraday binaries that I wanted. So I went to the Daily binaries and found the two that I used.

I think the BUY Binary being profitable has several things.

  1. It had 3 hours before Expiry.
  2. The market moved 45 ticks below the BUY Binary at time of Take Profit.
  3. The fact that I had set a Take Profit produced profit, but if I had not set Take Profit it would have been a loser.

I was wondering if the market had only moved to let’s say 15-20 ticks below the BUY Binary would it still be profitable with the Take Profit I set. Is there a way to figure that?

Here is a chart for USD-CAD marked up and a screen shot of the Nadex trade.

Thanks for any help at all.

#2

Not quite understanding your question here. Your buy contract would have not been profitable. The market went below your buy strike price and if help until expiration would have been a complete loss. Your sell contract would have been In the Money and profitable. At the time your sell contract took profit you would have been down a good amount on the buy contract. Check out this recent video on Butterflies and watch towards the end. You will see that we teach to exit both sides of the contract if the market hits on of the strikes on either side: Nadex Webinar 08/10/2017 Trading Range Bound Markets with Nadex Binaries

#3

Thanks for the response, this is what is confusing me how the Buy Binary was profitable even though it was above the market. Here is the trade Settlement. The Blue is the Buy Binary and the clear is the Sell Binary. Maybe it was a fluke? I will watch the video and continue to learn. Thank You.

#4

Very interesting… Was this in demo??

#5

Yes this was Demo!!

#6

It was definitely a fluke. Strange things can happen in demo.

The other day someone made like $650 with a fluke in their futures demo account :scream: To bad these sort of things cant happen live :wink:

But just keep following what you learn here from Apex and the real “legit” profits will come soon enough…

#7

Thanks for the response. At first I thought I had a new strategy Ha Ha.

The information and learning here on Apex is great. What little I have been involved in the Trading Room has been terrific. I will plan to live in the room every chance have.