How close is it??
I see on 1 lot sp mini contract your down approx 12.50 to start a trade and with nadex the equivalent is approx $30
Also I do not think the price is the real bid/ask of the sp mini contract , could be giving up another tick or so
Pros of course a lot less margin and less lot sizes
Cons are big meaning the spread difference between bid/ask
I am wrong??
What exactly is your question? Have you watched the videos explaining spreads?
Spreads are an option not the future contact.
The ratios are laid out on the scanner.
The bid/ask is of the spread. It is an option not the future.
The risk is capped, profit is caped though profit is larger than most make on any given future trade so its not really an issue.
I have list of pros and cons and more. about 1 tick on bid/ask spread is accurate (meaning 1 more tick (which for lower margin capped risk etc… is worth it and its normal its an option don’t forget this fact).
There are many post in here about the differences and a lot of education on how a spread works and how a future works. Please let me know your specific questions that are not addressed in the videos and forum i will be glad to help you.
Well my point is using Nadex and trading SP Bull Spreads your odds are stacked against you because spreads to wide
Go old book says if your not getting extremely tight spreads you have zero shot to profit
I like nadex but its best to trade binaries only
You say the “real SP” i think this is where your mistake is being made its a derivative. [also side note its ES unless your a floor trader then it is SP]
Note: I love futures and trade them. But you are comparing a derivative (north american DERIVATIVES exchange) to its underlying. ITS NOT THE FUTURE. Sorry for the caps but i hear this comment so often that people state as fact but not understanding they are talking about 2 different instruments. A derivative by nature should always have a wider bid/ask spread. Just like the call option derivatives of ES often have wider bid/ask spreads. Its a derivative it has premium etc… etc… .
They are also great as hedges for the future contract itself.
I would dare to say not managing profits taking them to soon and not letting them run, and not taking losses and letting losses run has been the demise of many more a trader than one saying “man those bid ask spreads where just 1 tick to wide and that’s why i could not make it in trading”.
However, you are missing the point. If you really meant your “old book” you where accurate.
Your old book is probably pretty old. Old meaning original print before this current decade (pre wide spread etrading and financial meltdown of 2008 and dodd frank implementation and all that fun stuff). I’m not being sarcastic. Old books do state this probably early 2000 or maybe even dated in the 90s with a couple 2000’s updates along the way… And that was very accurate and could still be accurate but its not in this case
To help me explain, take it in context. When many of these old books where written massive spreads could me $50 or $100 wide and $25 to $50 commissions per contract where common (depending on how old the book is). Things have changed a lot since many of those old books where written.
Looking at reality on futures depedning on if active month or not the bid ask spread is .25 to .50 which equates to $12.50 to $25.00
When looking at options on ES normal call options - the bid ask spread is .50 (with a minimum of 50 options per contract the bid ask spread is $25.00) this is normal for front week expiration it gets much larger the further in time you go out.
The Nadex spreads are usually between $4-$5.00 on US 500 so you can have a bid/ask spread of only $5.00. To equalize it though you would need 5 of them to compare apples to apples. Making the bid/ask equal to about $25.00.
This would place the bid/ask right on par with a front week option contract. The spread is an option contract so that makes sense. It would make it 1 tick more $12.50 (if doing 5 contracts).
If your ability to profit comes down to 1 tick the bid ask spread is not your problem. Your literally talking 1 tick. I don’t know about you but my risk reward is far exceeding that of 1 tick. If not then we can help you on that.
You need to remember there are much more dangerous things than 1 tick of bid/ask spread. You can increase your risk on a future by moving a stop (no you shouldn’t but we all have), or your stop being blown threw due to unexpected news etc (if it has not happened to you yet it will), or not putting a stop at all (mental stops which are mental), risk of margin calls, uncapped fees, inabilty to ratio size ie can’t do 1.5 ES can do 1 or 2, you can’t multiply your risk ie $50 more as you have to compound it as each contract on a future does not have capped risk. These are a few of the points you are missing out on.
You mention the binaries but the binaries are also a totally different instrument with similar or even sometimes wider bid/asks spreads. They are basically the delta of a call option with the same strike and expiration time. Make sure to stick to demo till you really get what the instruments are and how they work and be careful on those old books and sayings and making assumptions.
