Next Day Box Spread No Risk?


#1

Hey Im kind of new to Apex. I’ve gone through most of the courses and completed them all the way through and what interested me the most was spreads. Now I know this sounds like a newbie idea but why not just trade a box spread (hedging two different spreads) on a next day expiration for commodities? It seems like if you buy them way in advanced, the only thing you need to worry about is how much time you give them move before expiration. I’ve never seen any instrument go absolutely no where for 14 hours straight. So why not do a box spread to limit the risk, set a take profit and go to sleep? With the exception of the instrument not moving at all (which you further limit by buying it earlier and having more time till expiration), it seems like it cant lose. Any thoughts? This topic may have been covered a lot before, forgive me because I’m new. It just seems like a strategy with very few drawbacks. Looking forward to testing out the other ones on binaries!


#2

Spreads last 23 hours and 15 minutes at most so they don’t go next day (meaning they don’t go from before a close to after a close)

Spreads are an option which means they have premium. That premium is based on implied volatility. Implied volatility means expected move. So yes your talking about a Straddle (not a hedge). A hedge is where you lower the risk of one trade and pay some premium to do it (its insurance). A straddle is basically doubling your premium and the market must move the full extent in 1 direction or the other of the total premium paid or the trade will lose some or all of the amount put into the trade. If it moves the total cost of premium you at best brokeneven. The move often has to be large to make it worth it. This is why you will see most my news trades are premium Collection (iron condors) doing the opposite of what your saying. As straddles lose a lot unless the market moves more than expectations which it rarely does. Binaries are even worse this is called a “strangle” and if profit is not hit you lose everythign on a strangle so you really have to know what y our doing testing will tell you nothing it has to be very on purpose.

I listed a bunch of video to watch on this thread with links: http://apexinvesting.net/forum/elite-mvp-trade-review-229/how-do-you-apply-elite-mvp-nadex-spreads-1850.html#.U9F20Pl318E

Nadex Spreads Made Easy Tips and Misconceptions About Nadex Spreads How To Trade Nadex Spreads To Mirror The Underlying Market How To Trade The Right Nadex Spread Spread Scanner Course Stop Plugin Course


#3

I was just about to post a thread on this. I have been testing out straddles for about a week now. What I have been doing is taking the lowest risk daily spreads on oil right at 6pm, giving a full 20 hours for the market to move. 3 of the trades broke even, 1 expired ITM with only a $10 profit and 1 expired with a $94 profit and this is with only 1 contract on each side. From what I have experienced, like Darrell said, the market has to move a large amount for it to be worth while. Are there not any tweaks we could add to this system to either lower risk even more or to not have to have the market move as much to profit?


#4

Lol at the time I posted this, I did what I now know is a straddle on gold and I made a lot because It moved a lot overnight. Tried the same thing on other futures and lost a lot because the profit didnt cover my risk on the other side. Oil I won in both directions but I thought it was more luck than panning. Silver didnt go anywhere until the last minute so the net was a loss because the profits couldnt cover my risk on the other side again. I even put some capital on a silver straddle in live because I thought it looked like the same set up as gold. The one that won the biggest was EUR/USD at 7am because the london open is at 3am and the price tends to move a lot in the early hours. Tried gold again and the move wasn’t significant enough to cover my losses. Take profit for all of these were set right above (for a buy) and right below (for a sell) the high/low expected range. I set the expected range to the amount of time remaining on the contracts to determine a good place to get out.

My question for you Darrell: Is there a way to come up with a successful straddle strategy? It seems like its definitely possible if you have the right set ups. Unless you’re saying its all based on luck and you cant really get in at a good time. I’d imagine you’d have to trap risk right at the floor/ceiling of the straddle and it cant extend too far into the expected range. I’m going to lay off of straddles for a while and focus on other things but I want to know your thoughts on what I’m saying. Unless you’ve already gone over this and approached it the same way lol. It seems like if its just reliant on movement, it would work better if the risk was very trapped and the instrument tended to move a good distance quite a few hours before expiration (5-15).

As a side note, it seems like the spreads are always too wide for any instrument to realistically ever cover the entire distance. So the profit potential would for the most part be limited by the expected range right? I mean I know price can break expected range sometimes… But even then, the spread always seems too large to cover it. I haven’t started trading intraday spreads yet so that may be where they are more likely to cover the distance. But it seems like any spread at the floor won’t ever really touch the ceiling. It’s just a capped profit potential. In your experience, what kind of set ups have you seen that can mostly take full advantage of a spread (with a reasonable take profit) Even taking a profit between 75%-85% of the range would make me happy for something I bought at the floor or sold near the ceiling. But is that really possible? I know there are spreads I can use for a 1:1 risk reward but I was just wondering what realistically could work for taking a large profit potential for spreads.

EDIT: After doing more research, I came across a video where you explained straddles with the exact same mentality that I mentioned above.

With your expertise, are you saying that this strategy is impractical and it is no longer a good strategy to implement?


#5

Actually, over the last few days I went through a bunch of webinars and found that straddles only work when the market can move a lot (usually a good strategy for big news) and that iron condors are best to collect premium. I didn’t have any knowledge about that when I first posted that. After going through multiple webinars and extensive advanced strategies to have a better understanding on iron condors, butterflies, straddles, hedging and combining spreads and binaries, I just have a few questions now.

  1. I’ve seen how you implement the mvp elite with spreads using them pretty much ATM. But to capture a bigger move, do you ever use a spread with a bmx reversal and buying the spread at the floor/selling it at the ceiling if you get that signal? It seems to me that most spreads are completely unlikely to ever capture close to the whole value of the spread and since bmx reversals signal bigger moves, do you ever use them to capture most of the spread, look at the deviation level and set a take profit accordingly? It seems like the only way you guys teach to potentially capitalize the most off of spreads for pure profit potential. Or have you found anything else that could capture the majority of a spread other than that or a news straddle (of course with the mindset of taking a profit within a reasonable deviation level)

  2. Iron condors are meant to collect value off of time so why not use them a lot on markets that hardly move like silver, copper, us tech and the nasdaq? it seems like iron condors and butterflies would be perfect to use on them all day because the deviation level is usually low (correct me if im wrong) It seems like trading in consistent flat markets would net the most premium

  3. If you have a large account, whats the benefit of hedging futures and spreads? I noticed you said it was your favorite strategy. As someone who’s never traded futures alone, I don’t understand the benefit of that versus just trading with nadex other than blown off ceiling in one direction. I saw the comparison between the price of trading on Nadex vs other platform so why spend more money to trade futures with almost the same profit potential?

  4. Do you ever combine iron condors and butterflies? or combine straddles with OTM binaries (and take profit at $50 for binaries) on news trades? It seems like the way to capitalize off of your prediction the most. And can you hedge a straddle with a butterfly? Lol my mind is going crazy with the different possibilities.

  5. I saw a video where you were scalping on what looked like an order sheet for futures with a fully hedge spread so you were capitalizing on the fluctuation while the direction didnt matter because you were fully covered while you were in profit with your hedge. Do you have any extensive coverage on how to do that?

  6. Do you implement strangles? I haven’t seen any videos on that yet.

And thank you for your time. I really appreciate your expertise.


#6
  1. Rarely do we do straddles on news as it won’t move far enough as you noted. On the ones that do i note it on the news plan. Often ones that big move have the premium built in so straddles still don’t work.

Yes you can use a floor/ceiling spread if one is available and has enough time in it. But if the move is not large or fast enough then you will get burned on premium. So it is an option. I am more likely to do a hedge trade combining the futures or forex with the nadex spreads.

I would not say most spreads will not capture. Most dailies yes but many intradays do depending on the markets. But then again this is why i like the iron condor strategy so much.

  1. Silver and copper move a ton not sure what you mean by hardly move these are often the biggest moves of the day (NQ, SI, HG) on a percent move basis. TF being the only one that exceeds the NQ. But they trade places. But metals can move huge. It can be “deceiving” as they tick sizes are so much different but those are big 1-4% moves each day often on NQ and HG. You must remember the expectations are built in to the pricing. If its a flat market like EUR/GBP then the premium will be less. If its a volatile market like NG it will be in there. So there is not an edge if the market moves more or less as that difference is built into the price. The edge is correctly understanding expectations and then properly managing risk/reward and using volume to give you clues as what actions to take next.

However the point that you can do them on other times on other markets besides news using the deviation levels and expected hi to lo move indicators is definitely a trade system to use and I mention it throughout various trainings. . Butterflies are a different animal altogether than iron condors as they are all or nothing that is both their benefit and their weakness. As 1 tick against you you lose it all. One in your favor you make everything. If i do butterflies i usually do 15/85 if its outside the expected range of deviations (depending on expiration) and have a stop trigger set to exit both sides (1/10th of a tick off on the two tickets on trigger price to ensure both fire off)

  1. Advantages of hedges: Combined risk is almost always lower You have no cap on profits You don’t have an expiration that day on the future so you can trail your stop after the spread has expired (ie i rarely use a daily spread to hege with as I don’t want all the premium i just want it to move me past the initial risk. I also will hedge protect profits with spreads when a significant move has happened, pre news, at a deviation level, or something else on the charts warns me of a potential reversal. By hedging I can stay in case the market continues and don’t have to use a stop that may get hit and then it go back in my direction. I can scalp futures using spreads as a hedge. If hedging spread selection is easy. It does require more money as you need to be able to have the drawdown ie in futures account while your spreads are covering a majority of that loss as the accounts are separate. If you have traded futures a lot all this would make a lot of sense but hopefully some of it helps. There is no need for you to do it its just one of many strategies. Its the first one i made being a futures/forex/options trader it was a natural fit and allows a future forex trader etc… to do what they are doing but with less risk, without the expiration being an issue and with more simplicity while getting all the edges that futures offer (as mentioned previously)

  2. Combining iron condors and iron butterflies: this would be a pretty moot point as they are both neutral so your just doubling up in two different ways to do a range bound trade. Same thing on combining a straddle with a strangle (Otm binaries) just doubling up on a similar trade. Find the one with the best edge and trade it. I do sometimes combine a strangle with a condor. Or a straddle with a butterfly (strangled condor/straddled butterfly) - it moves in one direction close the straddle/strangle moves back capture the premium. Does not move at all then iron condor/butterfly covers the strangle/straddle. Moves huge then straddle/strangle can help cover the iron butterfly/iron condor.

  3. Scalping… not a ton on it… It basically the ultimate hedge strategy but done at areas of indecision like pivots/support/resistance/deviations/settlement etc… This takes a lot of practice to pick the right levels and do it. If your a scalper this is easy and natural.

  4. I have videos on strangles just search for them. But I rarely ever do them. Did one recently on Nasdaq 100 that i normally do but again it is rare as straddle are so much better do to not being all or nothing. If a strangle stake profit is not hit you lose everything. If a straddles take profit is not hit you may make some, breakeven easily, or at least on one side, or lose a little.

Glad your diving in but also be careful your biting off a lot and that is a way to make a lot of mistakes. Master a strategy, combine it with a system and reading the markets expected movements and volume, then master the correct selection of the contract to trade. If you do to much you will spend a lot of time studying and very little time trading well. Just my opinion after lots of traders but I love your questions great foood for though. If you can post questions that are unique in their own post going forward as we can’t move 6 post on various topics to the right area of the forum and usually have to bury it or delete it as there is no one good place to put it and this is good stuff :slight_smile: Keep it coming :slight_smile:

[quote=khari998]Actually, over the last few days I went through a bunch of webinars and found that straddles only work when the market can move a lot (usually a good strategy for big news) and that iron condors are best to collect premium. I didn’t have any knowledge about that when I first posted that. After going through multiple webinars and extensive advanced strategies to have a better understanding on iron condors, butterflies, straddles, hedging and combining spreads and binaries, I just have a few questions now.

  1. I’ve seen how you implement the mvp elite with spreads using them pretty much ATM. But to capture a bigger move, do you ever use a spread with a bmx reversal and buying the spread at the floor/selling it at the ceiling if you get that signal? It seems to me that most spreads are completely unlikely to ever capture close to the whole value of the spread and since bmx reversals signal bigger moves, do you ever use them to capture most of the spread, look at the deviation level and set a take profit accordingly? It seems like the only way you guys teach to potentially capitalize the most off of spreads for pure profit potential. Or have you found anything else that could capture the majority of a spread other than that or a news straddle (of course with the mindset of taking a profit within a reasonable deviation level)

  2. Iron condors are meant to collect value off of time so why not use them a lot on markets that hardly move like silver, copper, us tech and the nasdaq? it seems like iron condors and butterflies would be perfect to use on them all day because the deviation level is usually low (correct me if im wrong) It seems like trading in consistent flat markets would net the most premium

  3. If you have a large account, whats the benefit of hedging futures and spreads? I noticed you said it was your favorite strategy. As someone who’s never traded futures alone, I don’t understand the benefit of that versus just trading with nadex other than blown off ceiling in one direction. I saw the comparison between the price of trading on Nadex vs other platform so why spend more money to trade futures with almost the same profit potential?

  4. Do you ever combine iron condors and butterflies? or combine straddles with OTM binaries (and take profit at $50 for binaries) on news trades? It seems like the way to capitalize off of your prediction the most. And can you hedge a straddle with a butterfly? Lol my mind is going crazy with the different possibilities.

  5. I saw a video where you were scalping on what looked like an order sheet for futures with a fully hedge spread so you were capitalizing on the fluctuation while the direction didnt matter because you were fully covered while you were in profit with your hedge. Do you have any extensive coverage on how to do that?

  6. Do you implement strangles? I haven’t seen any videos on that yet.

And thank you for your time. I really appreciate your expertise.[/quote]


#7

Darrel, thank you so much for your expertise. I have a question I’m going to start in another thread. I hope it does intrigue you. And I heard you say in a video that silver and copper were slow but that might just have been at the time that the market was trading. And taking in everything doesn’t hurt me. Im too eager to learn and fully dedicate myself to learning everything I can.


#8

OHHH your thinking of spreads themselves. They are slow spreads as they tick larger than the underlying market NQ does this as well.

The market itself is not slow just the spreads movement as their tick size is larger so they have “lower leverage” on nadex spreads.


#9

Okay thank you for that clarification! I couldn’t tell if you just meant the market there is slow or not. So with slow moving spreads I’m guessing I was right to say iron condors may work the best in those markets?


#10

Again I would mot make that conclusion.

Define work better?

Slow moving means low leverage which means make less lose less.


#11

I thought iron condors made the most money if a price stayed the same. I think I understand what you mean by the speed of the spread now


#12

Actually, an iron condor makes the most money if the price ends at the floor of the upper sold spread which is also the ceiling of the lower bought spread