How do you scalp with straddle spreads?

#1

How do you scalp with Nadex spreads?

#2

say ES is at 1400 - then you want a spread with a 1400 floor to buy and a 1400 ceiling to sell (a minimum of 5 spreads on each side per ES contract you want to be able to trade, in order to equalize the 1 point move - i.e. a move from 1400 to 1401 would be equal to $50 on ES but only $10 on US 500 so you need 5 US 500 spreads.

scalping a straddle assumes the market will stay somewhat range bound

as the market drops you would then buy ES and when it moved up half a point to two points you would sell it if it kept tiong up say past $1400 then you could sell it at say $1402 and buy it back .5 to 2 pts lower. The goal is to make more on the scalps than the straddle cost. After that then your every additional scalp is pure profit. In addition ES may make a move without you being in a scalp which would afford you the potential opportunity to lose less/make more on the spread as well.

if you do more than just 5 on each side of the US500 then you an trade more oscillations so you don’t get “stuck” on one scalp if it continues to decline after you initiate the scalp. i.e. do 2 or 3 sets of straddles (10 to 15 contracts) on each side - so you can layer in to 2 or 3 scalps at different price levels.

#3

What time frame spreads are you using? How long does these trade last? Do you do these trades if the spreads are not same price level as the underlying market? How much movement is required to cover the cost of the other leg of the straddle?

#4

The max risk on each side it he amount needed to cover the risk on the straddle. This will most likely require several profitable scalp trades. Time frame till expiration on nadex spreads varies…I may do 30 min to expiration or 8 hours depending on what spreads are available and how long i think market will oscillate.

Scalps usually last from a couple seconds to 10-15 minutes just depending on how slow the market is moving. The more the better.

Note a straddle is not required you can just do this on one side. - i.e. long spread short scalps

You need the market to be between or very close to the floor/ceiling as it can only provide a hedge if in the money. There is no real advantage to talking a scalp trade for hedging that is not inside the spreads so i will only do one side if there is not a spread right near the floor or ceiling and then will bring the other one on if it get to that area so it can provide a hedge. You can even mix time frames on spreads to get a better straddle.

There is a lot of flexibility in this strategy and you need to understand how to use a dom trader to do it effectively.