This is premium. Time value accounting for amount of expected movement by expiration etc… It is simply a black scholes options formula.
Today was also unique as your trading right before a FOMC announcement and right after a GDP and ADP NFP announcement so IV will no doubt be higher on these days further increasing the premium. IV is Implied Volatility - aka Expected Movement - This is built into options price and is also extracted from it. We use it to develop our deviation levels every day.
Premium
When a spread is ITM the difference between the underlying market and the spread price is the premium. On the scanner this would be the “breakeven distance”
If a spread is OTM then the risk is the premium as there is no instrinisic/real value just time value.
product is at 100.15
spread is at 100.00 to 105.00 with a price of say 100.25
then the product/underlying is betweent he floor ceiilng of the spread
There are 15 ticks of real intrinsic value - the difference between 100.15 and 100.00
There are 10 ticks of premium value 100.25 spread price - 100.15 underlying price
If the product was say at 99.95 on a spread of 100.00 to 105.00 with a price of say 100.10
then there would be no intrinsic value as the underlying is not trading within the spread
but there is 10 ticks of extrinsic time value 100.10 minus the floor of 100.00
This Extrinisic Value - AKA Premium - This is the time/volatility value.
the more premium will be in the spread.
- The higher the implied volatility (ie right before FOMC),
- The more time till expiration,
- and the closer to a floor ceiling
The opposite also applies.
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So the closer you get to the center, Notice how the master spread the market is usually near the center is almost always trading right near the market price (less bid/ask)
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the less implied volatility, ou will notice say a night time fx spread (when its not international fed funds week) will have almost no premium in it - as there is say 2 hours till expiration, not much expected movement at night ie 6-8 pm etc…
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the less time till expiration the less premium their will be. Also notice that almost all spreads say in the last 5-10 minutes before expiration will be trading (so long as they are In the Money (the market is inbetween the floor and ceiling) at pretty much the exact same price as the market
So if you are right at the center or nearly right at expiration the price will basically be right at the market. Implied volatility has less and less impact the closer you get to expiration and the closer you get to the center of a spread. Y
When it expires it will expire at the settlement price of the underlying as there will be no extrinsic value at expiration only real intrinsic value which will be the difference between the underlying and the floor if bough - or the difference between the underlying and the ceiling if sold.
Now that your getting into them go back and check out some of the short spread videos - as you will learn a lot - the first time you are just getting your feet wet and a lot just passes by - then you get into them - see things like this and when you watch the videos - its like oh - ok that makes sense now -
Also to help open the spread charts along with a underlyuing chart and you will start to see the dynamics of how the premium grows or shrinks as it gets closer to futher away from the center, as time passes, etc…
Hope this helps ask more questions if you got em 
Darrell
[quote=jmilauckas]I did not want to take up everyone else’s time on the elite chat room today, so I thought I coudl ask u here…
this is a part of our chat today…you had asked me what price did I get in, and I answered below:
11:59:01 {jmilauckas_-_Justin} EURUSD 1.3312 GBPUSD 1.5219 and AUDUSD .8996
11:59:14 {prospero:Darrell_Diagnostic_Trading} ok so right now you would be up atou 21 pips on the long eur/usd about 25 pips on the gbp/usd and 14 pips on the long aud/usd
I was looking at the charts when I was in these spreads and also looking at the current market column that shows in Nadex when u have an open position. The price in the current market in the open position section of nadex did not match the chart. Especially EURUSD. Also the current market price for each spread, wether long or short, did not match the underlying market. I understand this is the bid or ask price , depending if u r long or short, but there was really quite a difference, so this is the effect of IV. So I didnt know if the current market price shown woudl ever get close to the actual underlying, but I suppose it would have to at expiry right?[/quote]
