Spreads move slow even if ITM?

#1

Hi everyone.

I am very, very new to trading and Nadex in general. I started playing around with Nadex last week (demo account) and I also hope this question is in the right section but if not I apologize.

My question concerns ITM (I beleive) purchases that still show a loss? I try to “buy” if low to the floor and “sell” along with this when it’s high by the ceiling in the spreads. So I try to have the two trades going in an attempt to cover it go up or down.

The problem is that whenever I do this it will sit at a loss for some time even though it’s clearly sitting inside the defined bounderies. When it does show a profit it’s usually very low.

What am I doing wrong? I’ve attached a screenshot. Hopefully I’ve made some sense with this description!

Thank you for your help

P.S. Thanks for this site and the videos. I’ve learnt a lot!

<img src=/uploads/db0876/1188/761c81933f71e3df.jpg">

#2

This is probably the most common mistake when trading Nadex spreads. You are not alone is this misunderstanding but if you keep traveling through the Nadex education - under education - nadex - spreads and under bonus webinars 1 and 2 you will learn all about these important points.

It is a matter of not understanding breakeven distance and how a spreads price changes. Using the spread scanner will help a lot with this. This is really a common mistake at night on indices and commodities. Then traders thinking the spreads price moves to slow etc… etc…

Also you are doing what is known as a straddle. This is the second “big” idea people get when trading the spreads thinking they will easily make money in either direction. Just straddle it at night or during morning volatility and then wa lah cash cow. Not so fast…When now they have just added to how far one side or the other must move before any profit can be made.

See straddles in the systems section.

What is the reason you are buying or selling. What is your trading system. Are you trend trading or trading on high expected volatility. You need to use the right spread for the right strategy for the system you are trading.

The close to the floor spreads have their purpose (ie hedging, straddles, synthetic spreads etc…) but these are all volatility based strategies - based on news, combining with futures/forex, making your own spread etc…

You are not looking at breakeven distance. There is premium in the spread even if ITM (underlying between floor ceiling) It is normal and simply a black scholes model. The good news is spread moves very “fast” ie delta once the underling hits the price you bought sold at but you really need to make sure you understand this concept. The closer is the underlying is to the price of the spread the faster the spread will move. The closer it is to expiration the faster it will move. The closer it is to the middle the faster it will move.

If you do a straddle you will have to cover the breakeven on one side PLUS the entire risk on the other side. This is why i do straddles on news when high volatility is expected and more than that. When the potential for more than high volaility is likely - ie news report off expectation then explosive move.