Darrell,
Im confused on an item with Nadex, I am new to the site but have watched many of your videos and have been demo trading now and have good grasp on all but the pricing, especially when placing a limit order when your position is already open, basically your target yo take profit, i was trying to set by putting the price i wanted to take the profit out by using the underlying asset price but it seems thats not right, it seems it goes by the pricing Nadex derives which im completely lost on how they come up with that, the price in the order tickets is what I’m talking about its always quite different then the underlying asset?
I am used to trading conventional options on stocks and etf’s so maybe this is why I’m confused.
Look forward to hearing from you!
Thanks!
Nadex Pricing Model
atrader2
#1
darrell
#2
Im assuming your referring to spreads.
They use a simple black scholes model. Simply look at the breakeven distance and use that it should work just fine as the offset on the price. Also you have to account for bid/ask spread. A good way to see this is to simply open the nadex spread chart next to the underlying chart (choose bid or ask) based on if you ar eselling to exit (bid) or buying to exit (ask) so you can see the correlation in price to know where to set your limit take profit order. Personally i trail profits versus set take profits. But to each his own.