Question on Nadex Spreads - NQ

#1

Hi all,

I was watching NQ today and waited for the long drop to the bottom to end and sensed a market reversal was happening. I wanted to enter a long trade using Nadex spreads but wasn’t sure because the indicative price was 5912, well below the Nadex spread range (5940-5980) The proximity said something like -88. None of the other daily spreads were within the actual market range either because of the long decline today.

My question is: Can you only make money when you go short or long while the market is within the spread range? Or could I have pulled the trigger at 5912 and possibly sold at 5938 for a profit even though it was still outside the spread? Thanks!!

@renzo1 @MATRIXBINARY373 @darrell

#2

You would be able to make money as long as the market moved in the direction of your trade.

Think of it as being one half of a straddle.

However, using your example… because the trade was so far out of the money. it would need a major move since the spread wont mirror the market in tick speed.

#3

Yea you would still make money if you bought the spread wen the market was at 5912. In this case the spread price would be slightly above the floor (lets say 5941). Therefore, you would be buying waay above the market. This would be an Out of the money trade, so you would be the one paying the premium of $10 if you bought it and the market expired below 5940.

However if the market moves back up to 5938 b4 the contract expires, your contract price would be higher (let say 5945). Therefore you would make money if you sold it b4 expiration. With my example you would make $40 on a 10$ risk even though the market is not inside the spread. The key here is to take your profit b4 it expires. Bcus if it expires at 5938 you will lose your $10. @COACHJOELGORDON