NADEX is "simpler" than ThinkOrSwim?

[scalperfreddy]

I’m new to options and as I learn NADEX through Apex, I am concurrently learning how trading on ThinkOrSwim works. Still unclear on exactly the differences, but I have a feeling the differences are more like nuances. Help me clear it up:

To trade options on ThinkOrSwim, I need to purchase stocks AND options as part of a complete strategy. In a sense, I am not trading options per se, but rather using options to increase my probability of success by reducing my cost basis of the stock. I am trading stocks and the options are a form of “booster juice” to help me trade better, yes?

On the other hand with NADEX, I am only trading the options themselves…no stocks involved. The common analogy for an option is a coupon, which has intrinsic/extrinsic value, and that’s the value I am buying/selling. On NADEX, the value of the option is derived (“affected”) by the underlying market AND time decay…the rate of change of this “affect” is measured by delta, which is the specialty of NADEX to have made the value of the option equal to the delta in order to make trading it easier.

Did I get the major difference between ThinkOrDrown vs NADEX understood correctly?

[bolsagt]

Hi, Scalper, let me help with very basic information.

TOS is a broker and a platform pretty much specialized in options trading, although you can also trade stocks, ETF´s futures and forex. They do not have binary options.

In order to trade options with TOS you do not have to buy the stock per se. You can buy and sell options as an instrument to make or loose money by itself. Of course you can do strategies like a covered call where you utilize a stock and an option to do it and there are a lot of different combinations between options and stocks that you can construct in their platform. There are also many risks when trading options and strategies using options that you will have to learn in the platform.

On TOS there are options that are based in stocks, futures and ETF´s. Not all instruments on TOS have options.

Now on NADEX you can only trade binary options and spreads. You can not trade regular options like the ones on TOS. The “binary” options offered by NADEX are NOT based in stocks but based on the underlying markets for the major indexes in the US, The German index, the Japanese index, The Chinese index and the British Index. Also they have binaries for the most important Forex(currency) markets.

The other major difference that you will find is the way the options are structure. On TOS, an option has a price and depending if you are buying or selling it you can have unlimited risk or profit. On NADEX you have a capped risk and a limited profit.

I hope this helps and please if anyone wants to add or correct anything I said please do.

[darrell]

Your comparing apples to oranges its not a vs type thing…

Think or swim is a broker that gives you access to multiple exchanges. You can trade options, futures, forex, stocks ETF’s etc…

Nadex is not a broker it is an actual exchange. Instead of trading through a broker you are trading directly on an exchange.

Options may increase or decrease your probability of success depends on what your doing

You do not have to combine stocks with options

You do not increase your probability by reducing your cost basis you just limit your risk (potentially as there are option strategies with uncapped risk)

An option is not called a coupon. A option is what is included in a contract you get x options per contract. A coupon is a treasury term for interest payments.

The price you are buying or selling (not necessarily the value as there is intrinsic value (real value if expired immediately ITM) and extrinsic value (time and implied volatility value) if it expired immediately ITM. You may make or lose either depending on on of over 100 option strategies one can use to combine options.

On all option style derivatives - nadex or call or put options on TOS the value is derived from the underlying, the implied volatility, the relation of the instrument to the strike, and the amount of time left until expiration.

Nadex binaries are in essence the delta of a call option with the same strike and expiration time as a call option.

Nadex spreads use a black shcole model like a call or put option on TOS (ie check US 500 spreads and calls with same ceiling or puts with same floor as spreads (5 spread to 1 ES option) and you will see they have the same risk. Nadex prices spreads in ie risk + the strike (where as a call is just priced as the risk/50 on ES.

A faster way to put it - nadex is options for day traders as your not paying for days weeks of premium you dont need, maximizing the delta to 1 fast and getting killer gamma. So if hedging, or straddling, or doing neutral plays, or directional in all conditions you get more bang for your buck and you can risk in smaller amounts meaning you can do small or larger risk but better control the % at risk versus having to do 50 or 100 or whatever # of options at a time like on exchange traded options listed on TOS and many other brokers.

I love TOS but again this is apples and oranges.