Deviation levels and nadex strikes

#1

Why is there sometimes a large discrepancy between your DD levels and NADEX strikes?

For example, the lowest ZS daily strike is 1528, but your -.5DD is lower than that?

#2

DD levels will be based on built in implied volatility so if it is high the deviaiton will go up – vice versa if low – right now IV is insanely high on soybeans i.e. on 10/1 a deviation was only 13 points – now it is double that (back in March it was triple what it is now) – the implied volatility is derived from multiple options over multiple months – right now the markets are trying to figure out of the south America crops will be enough to cover the shortfall in the US – soybeans made an all time high just last month and have dropped a lot – the drought etc… has led to a lot of options being traded (defined risk) and being used to hedge positions increasing demand, increasing expectation of move therefore increasing IV, In addition, soybeans has had an average true range over the past month of 30-50 so that is in line with the deviation projections

IV is picking up across the markets right now due to 1 – uncertainty that everything will blow up, 2 – upcoming election in a month, 3 – earnings season

Nadex strikes are set at a distance by instrument the same every single day with a set number of strikes – they don’t change based on volatility etc… so sometimes they will more than cover the deviations and other times will not

i.e.

i.e. daily below only shows enough to dover 45 points on daily 15 strikes x 3 – (but we have multiple 50-80 point moves in the past month)

SOYBEANS Duration Expiration Strike width No. of contracts Trading hours Daily Mon-Fri, 3pm 3.0 15 Mon-Fri, 10:30am-3pm Weekly Fri, 3pm 10.0 7 Mon-Fri, 10:30am-3pm Position limit: 2,500 Reportable level: 1,750