Nadex Distance To Breakeven?

#1

Hello Darrell,

  1. I was doing a short Bull spreads on GBPJPY and noticing something disturbing. The underlying price was 125.02. I wanted to sell at that price or close to it, but when my sell order was executed (only a few seconds), I got in at 124.76 (Avg Price) and Nadex’ Currect Mkt was 124.80. Why such a big different? (the time was in the Asian session so market was slow). How do I get in close to the underlying price?
  2. When the price got in quite lower than the underlying price like that (125.02 - 124.76 = 26 pips), my profit target based on the underlying price was totally off and that means I had to take my profit target lower to compensate for it (26 pips lower) which means there’s more risk since the market might not get that low. How do you get around this problem? You see, when I trade Forex on the Metatrader platform (MT4), the spread is not that wide and thus the risk is much less.
  3. When will you have Deviation levels for GBPJPY and EURJPY? These two pairs are on Nadex and people trade them.

Please advise. Thank you.

#2

Great Questions…

  1. the price that the spread is available at is shown in the spreads price window and on the market watch etc… The order is a limit order so when you approve the ticket you are approving that price or better…124.76 was the at or better price that was on the tickdet when you chose to execute the spread. There will be some bid/ask spread built in but that is always shown on the ticket. Depending on the spread you choose will determine how much premium is built into the spread. Use the scanner to find all spreads and quotes on spreads to see the one that is the closes. The closest will be the one that is near the middle of the spread price and/or close to expiration. This is covered in some of our videos on spreads under the tutorials sections. You will be able to find one close to the price in the middle or near expiration. (i.e. master spread is usually very close to on par with the underlying market as the underlying is usually near the middle of it as it is so wide).

  2. This is why we have distance to breakeven built into the spread scanner so you can find the spread that helps you find the right balance of: time risk (i.e. exp in 5 minutes or 5 hours) , distance to breakeven risk (3 ticks of premium or 10 ticks of premium), and dollar risk (risk between entry and floor(buying)/ceiling(selling). The scanner helps you sift through all the information rather quickly that is why I had it made with the live data feed so i could find the best spread for my trade. If i don’t like the trade or the spread i find a different trade or spread.

  3. The options on these FX pairs are very thinly traded on exchanges as they are cross currency pairs so pricing is not consistent enough to have accurate IV reading in order for it to be available to be properly extracted. On FX we obtain options on futures exchanges and then apply the deviation to the spot price. This is the most accurate way to do it OTC can easily be manipulated on the off exchange fx options so they are not used. We have found another method though and will implement it around oct 2013