Using the right Nadex spread as your stop loss

#1

I have been looking at Bull spreads recently because of a few recent binary losses where it went from $97 to 0 in a heart beat…

If the Dow30 bull spread was at 18000 (with a 100 point spread) and lets say I thought it would go up today and I got in at 18010 the underlying would be around 18004/18009 (BID/ASK) around the time I got in. It would cost me around $10 per contract plus the .90 cent commission (if < then 10 contracts). My maximum loss would be $10 and I would have a chance to make $90 if the DOW30 hit about 18100. Am I figuring this correctly?

#2

im guessing your saying

18000 to 18100 is the spread

YM at around 18004/18009

the ask on the spread is 18010

this being the case risk is price entered minus floor on a buy

18010-18000 = 10 ticks at $1.00 a tick would be a $10 risk

You can make up to $90 on teh spread

for every tick above 18010 the dow finishes you will make $1.00 on the spread

if the dow finishes at or above 18100 you will make max profit of $90 on that specific $100 spread (there are wider spreads)

You can lose up to $10 on the spread for every tick below 18010 that the dow finishes you will lose $1.00

If the dow finishes at or below 18000 you will lose a max of $10

You do not have to exit no matter how far it moves against you - and you are free to exit at any time to say take profits - ie dow moves up 50 points and you take profit at say 18060 to capture a $50 profit

(no commissions (no broker) - but the exchange fees are .90 on entry per contract up to a max of $9.00 per order)

(on exit fees are are .90 on exit up to a amax of $9.00 per order - with no fee if the spread/binary expires out of the money)

Make sure to consider

  1. time to expiration
  2. breakeven distance
  3. risk $
  4. profit Potential $
  5. risk/reward ratio

in that order when choosing the spread (order layed out on scanner)