Double Spread Nadex Strategy [Video]

#1

This is an advanced webinar on Nadex Spreads. It covers how to combine 2 nadex spreads to use the premium collection on one spread to pay for the premium cost in another. Its main focus is ensuring that you understand the breakeven distance and premium variables of a nadex spread.

#2

The website would not allow me to post under the thread of the webinar, so posting here.

Question #1 about the webinar: Why would you use the lower spread in the example given in the first place it you wanted to short CL? I mean, why not choose the ATM spread where the BE is so much less, instead of using the the ITM spread with 38 ticks to BE?

#2: I think the scenario you calc is at expiry. ie…the upper spread, if it expires at 107, then u would profit the 27 ticks for that spread. But what happens if you need to exit before expiry when trading apex? For example, The apex method gives you a red E, you go short by selling both of these spreads, and then the market moves up immediately and reaches your initial stop, you would lose on the lower spread like you normally would, but also would lose on the upper spread, isn’t that right? So the losses are greater bc you also sold the upper spread.

#3

You should havd a quickpost box below or a reply link if not let me know.and thankyou for feedback…i moved the post for you

  1. Recall the main goal of this webinar was to really hammer home the point of breakeven and premium in spreads and to use to build for future strategies I will teach (ie iron condors)

This strategy could net breakeven even on a move against you versus an ATM would lose

  1. increased risk usually goes hand in hand witg increased probability Though the otm spread would lose some but not much as it will move slower. Also it will make money as time passes so an exit depending on how fast it’s taken could be profitable. You could increase risk and exit when the underlying hits the stop to allow time premium the opportunity to cover the loss.

Even if not used if you learn the important concept of breakeven and premium the knowledge will benefit you

#4

#1) I still dont know why you would use the lower short ITM spread which would require 38 ticks down just to BE. It seems, a trader should instead, sell the ATM spread with just a few ticks to BE, then it only has to move down a few ticks to BE, instead of 38. Guess I just dont understand it.

#5

Repeating answer

You are focusing on the wrong point of this educational webinar

they are options so you have options…

You may never use it that is okay. There are over 80 strategies that I will roll out over time there is no way you will use them all. If you like ATM stick with it.

Many traders don’t understand ATM options they go for the cheap OTM spreads and think the instrument moves slow (as in almost everyone who first tries to trade them). So this was to open their eyes to issues with this and to open advanced traders to the additional premium collection possibilities.

I cant tell you how many 1,000s of traders post here, webinars, forums and go they move to slow I always lose the premium is to big…well if that’s true instead if dogging it or ditching it I have learned to go hmmm what if I then do the opposite. This simple thought process puts you way ahead of the pack.

They will then say but the risk is to high etc etc. They are problem focused not solution focused. I’m not saying ignore the problem but rather see it as an opportunity to find a solution others have not even thought of.

I tend to focus on solutions which is why I see things many don’t

Also again Recall the main goal of this webinar was to really hammer home the point of breakeven and premium (paying and collecting) in spreads

It is a stepping stone strategy to build on your knowledge for future strategies I will teach (ie iron condors). This would be buying the lower and selling the upper TO COLLECT premium versus pay it.

Again why this Versus ATM ??? This strategy could net breakeven even on a move against you versus an ATM would lose this is why one could choose to use it. It is not to say one should or shouldn’t. Also it more points out how to cover spreads premium that are closer to floor ceiling (maybe you want them as you want more profit potential etc… We could put up a list of pros and cons etc… But that would be missing the point

But regardless as I stated in the post and in the forum the main takeaway is not simply the strategy but a understanding of breakeven distance and making OR paying premium. If you understand breakeven AND how to be not simply a payer but also a collector of premium (something most people have never considered on spreads). If this opened your eyes to the downside of breakeven distance (something which obviously you get) AND the possibility to collect premium then that was the goal (the main takeaway) I emphasized this in the webinar multiple times. Not sure what your sticking point is here. This is not a sale you on double spread versus ATM spread strategy. As you learn how the instruments work and what’s possible with them you will develop the skills to see many opportunities as their is a variety of option able ways to trade Nadex binaries and spreads. As warned it was a advanced webinar but hopefully one that opens your eyes to see things in a different way.

#6

Hello, Im trying to understand how these DITM spreads work, I saw the video on Premium collection on spreads, but I can’t get. I buy a Spread on Oil that’s Crude Oil (Oct) 108.25-109.75 (12PM) with a B.E.Distance of -21. at 109.48. the underlying price was 109.69. When the order was open, I was in a loss of -$10, I’m sure it was the Bid/Ask Spread. However, price moved up to 109.80 and I was only Up about +$1.00. I’m confused, why the big difference. cause I thought this Breakeven distance meant that it had to move Down 20 ticks before I start losing. also, how come when it moved down a few ticks I was in a loss of about -$15.

I tried to understand this strategy, but I lose quicker than I gain, yet I’m deep in the money. doesn’t make sense to me. I’ve tried it 3 times, always same result.

#7

moved post from platform to the video on using this strategy - there are multiple ways this is just one of them.

Anytime you open an order you will be down the bid/ask spread this is normal whether trading futures/forex/stock/binaries/options/spreads etc…

You where down 10 on bid/ask spread - the market moves up 11 dollars - you where up $1.00

Well you covered 10 bid/ask spread and you covered $1.00 of additional had 11 ticks of movement

Breakeven distance is for expiration - ie by expiration the underlying has to move X number of ticks for you to be breakeven when there is no premium in the trade

While there is premium in the trade it will of course fluctuate as the price moves, and most importantly if implied volatility comes into the market.

But remember this is premium collection - you will make the money on time that is the goal is to make it on time not movement. If you held to expiration and it was above the price you bought the spread you would have been profitable.

Understand this is a very advanced strategy it is not recommended for those who have not mastered basics of spreads. Based on the questions make sure to master ATM and close to floor ceiling low risk spreads first. This is definitely not the strategy to start on.

#8

Thanks, I understand what your saying now. it was a time collection, not a movement, so if time would’ve passed It would’ve made me the full amount of $21 on the B.E. and yes I get that this is an advanced strategy. thanks again.

#9

Yes you would make money on movement but very very very slow as most of the premium is simply time based.

#10

DM - This was a wonderful eye opener. Selling premium to cover the cost of premium is truly an advanced idea. Looking forward to more discussion on iron condors which you just touched on in this video. Thanks for the new insight.