Option Greeks vs. Nadex Greeks


Recently a trader asked about how the Greeks worked with Nadex binaries and he referenced Option Greeks…

I’ve been playing with the expected range indicator, and the butterfly strategy all week. Like Darrel says, pick one strategy and get good at it right! It seems in practice I can pull off some of these trades, but in real trading I haven’t won one time! I’m using the stop trigger plug in to get me out at the current strike if it starts to go against me and I use a take profit of $5/$95 and just put them on during “flat” markets. Any ideas on what I’m doing wrong? It seems like the probabilities aren’t very reliable in nadex. And maybe I should just do the other side of my trades and take a lot less risk in doing so? Maybe use the stop trigger as a take profit instead of a stop loss, basically do the exact opposite trade, than what I have been doing?

I’m just learning nadex, but the “probabilities” do not seem to match up with reality. Also I think my options background might not be helping me here, since I’m trying to do strategies I do every day with listed options, and successfully so, but to no avail with nadex. Is there anything on your website that has explains “the greeks” of nadex options? I saw a few videos on it on YouTube that apex put out, but they were very basic and basically just mentioned them in passing, but didn’t really dig into them. So I have a few “Greek” questions for you…

Volatility - in low volatility, do the strikes Nadex lists closer to the indicia very and in high vol they are further away?

Theta- I’ve heard things in videos mentioning time decay in binary options, but there doesn’t seem to be any in actuality, the ATM strike is always at $50, it doesn’t decay at all, so where is the theta?

It seems like vega and theta aren’t part of binary options, and they are mostly just priced off the delta. I can definitely see how the gamma can give you super fast profits and take them away just as fast. I see the appeal. I’m just not really a chart/indicator type of trader. I don’t want to have to sit in front of the computer staring at charts all day. I like to sell expensive options (ITM in Nadex terms) and let time decay/volatility come in.

Maybe I would have better luck just buying OTM and taking my profit if the indicia I’ve gets close,idk. I’m a bit frustrated as I thought I had a winner with butterflies, even if I’m looking at the charts on NinjaTrader, and the expected range/volume are looking good, I always get hit. I sell one for $20 and buy one for $80, and it just seems to always stop me out. I’m trading currencies at night on the hurled too, not 5 minutes or even 20 min. I thought the hourly would give me a conservative distance, but I always get hit.

Comparing the Greeks in options and Nadex

This was Darrell’s Reply…

A binary is a delta of a call option. Therefore, butterfly setups trading Nadex binaries won’t work the same as trading regular options, but spreads will. To exit at $5 when shorting $95 when long, is a great rule, you also need to look at the binary ladder to see optimal take profit exit prices. i.e. …difference in price between different strikes, do you get more value or time with the lower or upper strike or 2 hour vs 1 hour binaries.

Probabilities are based on IV (implied volatility) and based on expiring, not on the underlying market touching the strike. The market may touch and go above, below, the strike etc., but probability is in relation to expiration time and thus referring to expiration time, with Nadex binaries. And, it’s not exactly either, because it’s a delta probability.

We have a few Nadex options article series and have done 2 webinars on them High IMPLIED volatility pushes price close to the center being 50 on a binary as the probability becomes closer to 50/50. As our videos and articles state binaries are deltas, so they don’t really have a theta. Iif looked at as a probability, delta that number will approach 0 or 100 faster the closer entry is to expiration depending on if the entry was ITM or OTM. Vega is very very very much a part of binary options, as it has a large impact on gamma, which has a large impact on delta if IV is high. If IV is low you will see little Vega gamma impact. As I tell all traders, focus on spreads they act like a vertical option. Like very wide verticals, in fact, if you compare a spread on US 500 to a call on ES, on say Thursday night to Friday morning, they will move the same, note the 5 to 1 ratio.

Also, note ES will list in risk, where as Nadex will list in risk plus price.

You’re trading a Greek delta when you trade a binary…the call of a Friday expiration on ES, the delta will match the binary with the same strike give a few ticks for bid offer spread and IV variances.

Below are a few videos that go over Greeks for binaries and for spreads.



In addition to the videos there is an article series covering the subject.

Simplifying the Greeks On Binaries: Intro to a Series

Simplifying The Greeks On Binaries: Delta and Gamma

Simplifying The Greeks On Binaries: Theta and Rho

Simplifying The Greeks on Binaries: Vega


The trader replied with another question…

Thank you!! I learned more from that email than I have this last two weeks listening to the apex webinars combined. I guess I just needed it related to listed options!! Is there any statistics or Market data for Nadex binaries? I found the market data on Nadex’s website and it’s pretty basic, has anyone put those into excel and run the numbers on the probabilities? For instance, if you sold/bought the 20 delta hourly binary in ES, does it win %80 of the time like the probabilities imply? Does it actually win %90 in reality or %60 or %70 maybe? I just ask because I’ve found when you get out to the 1 standard deviation in listed options, they win over %85 even if the probabilities imply a %68 win rate. I’ve gotta rethink how I’ve been doing these binaries, thanks for all your help!


Darrell’s reply…

Yes, the stats line up with pricing, tested multiple times. Hence you can’t profit by holding to expiration. Tested ie if you buy at 20 it wins 20% of the time.

Re: Deviation Levels We do not use the standard deviation, it’s not accurate. We use implied deviation. It’s much more accurate and sensitive to live market conditions. We plot them for you for free on 22k markets.

Kellie again…we have a video on the Deviation Levels if you’d like to know more about them.