Nadex Hedged Butterfly Strategy


#1

Don’t know if this would be a help to anyone but this is what I have kind of been playing around with and want to know if anyone else has and if so, maybe find some tweeks in the strategy.

Example: AUD/USD indicative is at .74614

Sell strike is .7462 and it is selling for $25 Buy strike is .7457 and it can be bought at $76.25

Potential Profit is $48.75 if expires in-between. But what happens if it goes against you. Say the indicative falls below .7457 and you are now out $76.25 if it expires? You can either sell the Buy position and buyback the Sell position for hopefully a loss no more that $30 or so. But I have been experimenting with a strategy that will allow you to hold until expiration and still only have around a $30 loss but potential to make ~$70.

So this would be the set up. Sell the .7462 strike for $25 Buy the .7457 strike for $76.25 Watch and hope it expires in middle, but say it moves below .7457! Look at next strike below (probably around .7440 or so) and see if you can buy it for around $$75-$85. This way, if it rebounds back in your original butterfly, then you can profit anywhere from an extra $15-25 or if it loses the original butterfly but stays above the hedge, then you only lose $25-$40?

This has worked for be before in demo and the butterfly (original) has demo’d excellent. Thinking about adding this Hedge to the original but didn’t know if someone else has already experimented with this already? I am sorry about the possible semantic confusion, I am self taught on Nadex so I may be saying things or explaining things wrong :confused:


#2

What if it does continue going in one direction tho? U would get creamed. just takes few of those to whip out all ur wins. My advise is to do Iron Condors on spread and not iron butterflies. You will make more money doing that with less risk. Just try doing them in demo on indices overnight and news on forex.

However, if you prefer doing iron butterflies then you can continue doing it, just know ur risk of getting hurt is a lot higher.


#3

I guess I am confused on what an Iron Condor is? Could you provide a link to a video or article explaining what it is? I have looked but am new to this site.


#4

These videos are kinda old that’s why the scanner looks different but its the same way you put on an Iron Condor.


#5

Yes, Iron Condors are like Iron Butterflies. But, you use spreads and not binaries.


#6

They are both used to collect premium, but Iron condors will usually give you a much wider range and stop if used properly.


#7

I used to do this a lot and it can work well until it doesn’t. Iron Condors have a much higher rate of success. With the butterflies your best best when hedging is to not buy the hedge until you get a solid counter trend signal. Also only buy and selling your original butterflie position based on signals let the market establish it’s range then make your butterfly. Be aware of news and of course strong price levels as resistance and support as well as price magnets. Make sure you are using the “expected range” and expected time indicators as well.


#8

@ronin50 the problem is the late night forex pairs only have 2 hour spreads available when the market is slow and easier to do successful iron condors/iron butterflies. Those 2 hour spreads barely have any premium to them so it wouldn’t be worth it. Binary iron butterflies are really the only viable option for evening premium collection trades that end at 3am ET before Europe open when volume picks up again. Am I missing anything?