this is a post from a BOD member, Ray.
It would give all a different perspective to trading binary options especially with a US regulated platform like NADEX, an exchange rather than a broker.
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So, what do you see there? The 24O trade is very straightforward.
I put $250 on the trade, finished ITM and made a profit of $210, an 84-percent return. I got in when Nasdaq100 futures was at 2571.62
For the Nadex trade, note that the strike price of the contract that I was trading was 2576. I got in just a minute and a half before I placed the 24O trade. So, the Nasdaq futures were trading roughly around the same price as when I traded on 24O. You can see that I got in initially at about $21. The contract was priced at $21 because the futures were about 4.5 points below where it would have to be in order for the contract to finish in the money. So, it can be thought of as a probability of 21 percent that the contract would finish in the money. Why would I buy a contract with only a 21 percent chance to finish in the money. For two possible reasons: 1) if it does finish in the money, I will make a profit of $79 per contract that I bought. $79 of profit on a $21 trade represents a 376 percent return. 2) I can trade in and out of the contract until expiry.
In this case, it was method number two that I was interested in. I had a belief that Nasdaq futures would rise from the 2571 before expiry. Would it finish above 2576? I had no idea. But, that wasn't the point since my goal was to capitalize on my belief that it would rise. Initially, the price went against me. It dropped all the way to 2566. At that point I added to my initial position of 20 contracts. I bought 6 more contracts at $10.50. Then the price went even further against me. The contract fell to a mere $3.50. So, I bought 1 more contract bringing me to a total of 27 contracts. By buying at multiple lower prices I was able to average down the cost of the contracts to about $18.
That's when the fun started. As I expected Nasdaq futures started to rise. Eventually they got back to 2576 before expiry. That upward movement caused the price of the contracts to rise and you can see that I was able to get out around $47.50. So, roughly speaking, I made a profit of $29 per contract which represents a 161-percent return versus the 84 percent return I made on the 24O trade.
Note that ultimately, the Nasdaq 100 > 2576 (10AM) contract on Nadex finished OUT of the money. As shown on the 24O screenshot, the final Nasdaq level was 2572.125. But, that didn't matter. My goal in this case was NOT to try to determine whether it would finish above 2576. My goal was to TRADE the MOVEMENT. That's the beauty of Nadex. It offers an opportunity to engage in real trading. You buy contracts, you sell contracts. That's trading.
One more note. As I mentioned I bought 1 contract at $3.50. Yeah, yeah, hindsight is 20/20. But, just reflect for a moment. Let's say that I bought _all_ my contracts at $3.50. Let's do the math. I buy a contract at $3.50. I sell the contract at $47.50 for a profit of $44 per contract and a return of 1257 percent. You will NEVER, EVER get a return like that trading on 24O and other "brokers" like them. On the other hand, situations like that happen EVERY DAY on Nadex. Am I saying that you are going to be skillful enough to make returns like that? That depends on you. But, the mere fact that returns like that are even POSSIBLE should get you thinking about whether you are trading on the right platform.
Net gain on the Nadex trade: $767
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