Question: 20 min Binaries

#1

Over the past few weeks I have been studying the binary strategy of butterflies. Particularly, the 20 min indices.

In order to do this I have all this working all together:

a. NT w/apex charts

b. Apex Scanner / Stop plugin

c. So far, the system, everything is working like clock work

However, what I am not seeing or perhaps I misunderstood is the part on how much you can lose on a butterfly trade when it does not work in your favor.

The training videos state that there is really a $5-$10 risk when doing a butterfly.

However, as I am attempting to trade for skill I am see loses of $22-$28 (without fees) when the trade does not work. I did have one trade that did not work with a loss of $14 w/out fees.

As far as I know I am following the rules.

I am getting out of the trade the moment when one side hits the other.

I am not widening the spread so that I do not derail the Risk Reward Ratio.

I am using the stop trigger with an offset of $10 (default)

The internet connection latency is around 50-70ms

Entry on the bid and sell are as even as possible.

The only things that I did different is that I demoed the Butterfly strategy when the market is not exactly all that flat.

(Between 10 eastern and following this Monday a.m)

I did this so that I could see what Kind of loses I would experience. Any thoughts in regards to this matter?

#2

I am an old Options Trader and I love Binaries. I used to do a lot of lunch hour Iron Butterflies. I always set my Butterflies up using Expected Range-Hi/Lo and Close to Close. Setting my strike above/Below CtoC as a minimum. My ideal contracts were ITM, Buy @ 75 and Sell @ 25. The only stop that was used is if the strike was about to be hit then close contract. Ideally out about $50.–which means you close contract before strike hit. The math works out at a Max Risk of $25 (strike that was hit) (-) Profit from other strike. Max Profit was about $38 for me, Max loss was usually about $12 to $18.Give Or take closing both contracts… I am not a believer of letting the Binary Expire. Been burnt too many times during the Blackout period. So I use the Price Ladder to see amount to exit at. Oh, by the way, I had much better luck using 1 hr Binaries rather than 20 minutes. I think the Market Makers Stress the 20 minute Binaries too much. Craig

#3

Thank for the reply and the additional information.

I have a few questions:

  1. your wrote: " …Ideally out about $50.–which means you close contract before strike hit." a. Do you do this manually?

b. Do you use the Apex Stop trigger?

c. So if you wait until…provided that both sides are even entries. The Top strike price hits the bottom strike price, and you get out. By the time this happens if you are expecting to lose $25 when it hits that strike price and you try to get out then its NOT going to be $25. Its going to be more that $25 when this happens. Is this what I am understanding? (I pretty sure that is what I am seeing I write just about everything down.)

If this is what I am seeing and understanding then to remedy this you get out sooner by using the corresponding Nadex Price Ladder to find an exit point?

  1. you wrote: “Oh, by the way, I had much better luck using 1 hr Binaries rather than 20 minutes.”

Question: a) What are your trading 1 hr binaries on?
Indices only has 2 hour.

  1. Your wrote: " I am not a believer of letting the Binary Expire. Been burnt too many times during the Blackout period."
  • I agree

Question: It is my understanding that butterflies are for a. Flat Markets b. You hold them until expiration (Strangles you get out before expiration)

How are you able to profit if you get out early on butterflies?

Hope to hear from you soon. Thanks

#4

Hello Manolo7009.

  1. I would use the Apex Strike Trigger and set my stop loss about 2 ticks before strikes are hit. Depending on how close to expiration you are, you should be out with about a $25 loss. Buy at $75 and out at $50 equals a $25 loss. The still active contract will not be up $25 in profit yet–depending on how close to expiration you are. Thus the difference in Max Loss. The longer the time you have from entry until you exit, the larger you profit will be to OFFSET the other side LOSS. Nadex Price Ladder has nothing to do with your trade at this point… The Price ladder is used for Take Profit only.

The Nadex Price Ladder is used to see were order Prices are currently at. If the ladder shows a low of $6.00 then you might want to set your Take Profit slightly higher. Say $6.50-$7,00. This way your contract is picked up before the $6 contract.

  1. If you do your homework and enough orders, you will find that you can get better Pricing with a longer expiration. Same goes with Spreads. By giving your contract more time, you get wider contracts, better pricing and up your odds for success. By being aware of Expected Movements and looking at the Expected Range Boxes (from charts) as long as no big difference in Box sizes for one period to the next, you have as good a crystal ball as possible.

  2. Premium Collection, in which Butterflies are one member, is for range bound markets. You will get movement. That is expected. As long as your strikes are not hit, you are good. That is why you use strikes that are at least Close to Close level (or farther) on you chart. Then choose strikes about 75/25 for your orders. Some folks will use working orders…some not.

I will not hold until expiration! Do as you choose, after all it is your account and money.

With longer expirations, you will often have both contracts show a Profit and strikes are placed beyond the Expected Range Box.

Hope that helps.

#5

#craigmac craigmac

Thank you for your input on this topic. It was so great that I just had 4 profitable trades, although demo, and that is a step in the right direction. May have some questions next week. I hope you are around.

Thanks!