Natural Gas's Wacky Intraday Binary strike widths and my email to Nadex

#1

Here is my email to Nadex concerning their 200 tick wide Intraday strikes. I hope I hear from them soon. I will report back here their response:

Hello Nadex,

I have for a couple months now started trading Natural Gas with Binaries and I have noticed something I find very strange about the Intraday strike placements.

The Intraday strikes are 200 ticks wide!? That is crazy, they are basically unusable for that 2 hour period except maybe the at the money strike. These strikes are + or - 2.5 deviations! Intraday strikes are wider than the daily strikes and even the weekly strikes? This doesn’t make sense? Please explain.

Here is a snapshot from your “Contracts Specs" page on NG

NG%20strike%20goofy.png748x172

As you can see the Intraday are .200 ticks wide, the dailies are .040 ticks wide and the Weeklies are .100 ticks wide?

This does not follow your pattern on other indices. Is this a mistake? If not, how do your justify 200 tick wide intraday strikes and 100 tick wide Weekly strikes?

Maybe you are missing a zero in your algorithm and you meant to set the Intradays to .020 (20) ticks wide? This would make much more sense.

I know traders that have told me they won’t trade NG because of this.

Thank you for looking into this, I look forward to your response

Sincerely,

Christopher

#2

I heard back from Nadex. They are going to correct the Intraday Strikes on Natural Gas! Here is their email response to me:

[b]This should be a great help if you want to trade Spike Striker off of the Inventories report of any other hour for Natural Gas!

Woot Woot! Victory![/b]

Here is my Orignal email to them:

http://apexinvesting.net/forum/markets-48/natural-gass-wacky-intraday-binary-strike-widths-my-email-nadex-2230.html#.VCDLpPldU6s

#3

They are going to fix the Intraday Strikes!

http://apexinvesting.net/forum/markets-48/nadex-going-fix-natural-gass-intraday-strikes-here-their-email-response-2239.html#post7144

#4

As you may have noticed we sent over a list of what the binary strikes should be to nadex by analyzing every market on every time frame every single day every single hour for 12 months. This is what is being implemented.

09.22.2014-21.40.png936x527

They have started putting this all into place as you may have noticed on the US indices and several forex pairs already. They will be rolling out the new widths and number of strikes throughout this year.

The reality is NG has MASSIVE moves it can move 3% in a day and that is not abnormal. They have to have a market maker that can take on that risk and lay that risk off on NG. NG itself is not super liquid future (often less than 10% of what Oil does on a daily basis) so it stands to reason that it would be more difficult for anyone to make a market on a derivative of it. They are working on this now to implement this as they add on more market makers.

Sometimes its not about the simplicity of better contract specs sometimes its about how the market really works and having a market maker that can work it.

I wrote a article on this a couple months back: http://apexinvesting.net/forum/content/207-nadex-announces-new-strikes-adjusted-strike-widths.html#.VCDRXvl318F

Remember as traders we want better strikes but we also want a market maker that does not go bust :slight_smile: as we want them there tomorrow so we can keep making money.

Nadex has 3 market makers now that specialize in a variety of areas and will be adding on more.

#5

Darrell,

Thank you for that added context! I was not aware of the proposal for NG. I missed your article.

Geez, I feel kind of silly now, I wouldn’t have sent them an email! I suppose that’s why I posted it here, I was hoping someone would be able to explain it better.

I couldn’t understand why the intra day strikes were so wide? They are basically unusable.

Thank you for that explanation !

I

#6

We have proposals in for every single instrument. They will roll them out in the coming months :slight_smile:

Dont feel silly you sending the email reinforces the needs for the improvements. The more they hear it from more traders the more impact it has :slight_smile:

Thank you for telling them what to improve :slight_smile:

#7

Any timeframe on nadex adding more strikes to the us 500 vs the 3 pts apart as of now. I hope they would go to every point…

#8

They have tightened them up on the 2 hour binaries.

They have also added the 20 minute binaries on US 500 with 2 widths both super narrow (even narrower in mid afternoon).

I doubt they will tighten the daily on US 500. There is no statistical reason to do so at this point.