Nadex Forex Bull Spreads
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Thread: Nadex Forex Bull Spreads

  1. #1
    Anybody been trading those?

    Learn about Bull Spreads
    Bull Spreads have a variable payout that lets you take a short-term position on the direction of a market. Their structure allows you to trade on where the price will go to intense price changes.

    Underlying market
    Bull Spreads are settled on the basis of an inherent market. This is generally a Futures market; for example, our Oil Bull Spreads are settled based on NYMEX* Crude Oil Futures prices. For more details, visit Contract Specifiions.

    So, when you buy a Bull Spread contract you're taking a position that the inherent market will be greater when the contract expires. And when you market a Bull Spread contract you're speculating that the inherent market will be reduced in the time of settlement.

    Limited risk: Floors and Ceiling
    Each Bull Spread contract includes both a Ground and a Ceiling associated with it. These represent the minimum and maximum amounts at however far beyond either level the inherent market may have moved. The Ceiling and Floor values for each individual contract remain constant throughout the life of the contract.

    Because the settlement range of a Bull Spread is defined, the maximum potential loss (or profit) is always known in advance.

    Contract Ranges
    Nadex delivers various bull spread contract ranges, with longer duration bull spreads with a broader range and shorter length contracts using a bigger range. By way of example, our 21-hour EUR/USD Bull Spread may have a range of 600 pips, with a Floor at 1.3400 and a Ceiling at 1.4000.

    The 8-hour and 2-hour EUR/USD Bull Spreads each have a smaller distance between the ground and Ceiling and are staggered in overlapping ranges. While 8-hour Bull Spread for EUR/USD includes a range of 250 pips, the 2-hour EUR/USD Bull Spreads each have a range of 100 pips, such as follows:

    (a) Floor: 1.3600, Ceiling: 1.3700
    (b) Floors: 1.3650, Ceiling: 1.3750
    (c) Floors: 1.3700, Ceiling: 1.3800

    Contract size: $1 per point
    All Bull Spread contracts are described like a 1-point (or 1-tick) movement means a $1 profit or loss per contract. By way of example, in the event that you sold them and bought 5 contracts your profit would be 5 x 35 x $1. In the event that you bought 10 contracts that were settled in a loss, you would lose 10 x 19 x $1 = $190.

    So whenever you trade a bull spread, you know that a 1-point motion is worth $1 a contract for you.

    The definition of a'stage' fluctuates between different inherent markets. By way of example, Crude Oil is priced in dollars and cents, i.e. $71.58, whereas the Wall Street 30 is quoted as a whole number, i.e. 10625. In each situation, 1 stage is a motion in the last digit, i.e. $0.01 for Crude Oil and one index point for the Wall Street 30.

    To view the value of a'stage' for a given underlying market, please consult with the Tick Size value in the Stock Indices, Forex, and Commodities contract specifiions.

    Trading Bull Spreads
    If you start a position in a Nadex contract, then you don't need to hold it before expiry. You can log into the platform and enter an order to partly shut, or shut, your position at any time before expiry.

    Nadex takes you to fund the utmost risk of any trade before the position can be opened. This maximum risk is described as the gap between your order level and the Floor level (for buyers) or Ceiling level (for vendors ) - therefore these amounts determine the funds needed to start a trade.

    Comparison with inherent market
    Assuming that the inherent is trading involving the Floor and Ceiling of a contract, the Bigger the Floor/Ceiling range and the shorter the time to expiry, the closer the price of the Bull Spread is into the price of the underlying.

    For Bull Spreads with thinner Floor/Ceiling ranges or longer expiry occasions, or in cases where the underlying is outside the Floor/Ceiling range, Bull Spread prices will tend to reflect the optionality within the contract and be further from the price of the underlying. The thinner the Bull Spread range, the greater the protection against adverse moves, the higher the funding requirement, and the greater the leverage.

    Range WidthOptionalityProtectionFunding RequirementEffective Leverage

    Expiry and payoff
    Consider a EUR/USD Bull Spread with a Floor of 1.3400 and a Ceiling of 1.4000. If this contract reaches expiration and is settled against the inherent market, there are three potential scenarios:

    Expiration Value is at or below 1.3400: contract is settled in the ground value of 1.3400
    Expiration Value is between 1.3400 and 1.4000: contract is settled in the corresponding value between 1.3400 and 1.4000
    Expiration Value is at or over 1.4000: contract is settled in the Ceiling value of 1.4000
    Note: Floors and Ceiling values only apply to settlement, they don't behave as Stops or Limits and cannot trigger a position to be closed.

  2. #2
    A fantastic way to begin the trading day!

  3. #3
    Keeping aside the problem of is Nadex a Currency? ( the MM of Nadex MRM and the exchnage owned by same group)
    I'd like to ask a simple question on egy
    If hedging a Futures place using a Nadex Spread ( Not binary and presume f the ground or sealing of the spread is close to the inherent
    ) will the Spread mve as fast as the Securities deal? Delat of 1!
    ANy thoughts. . Anybody tired this

  4. #4
    Hi, are ou all of US residents or is there a way to trade with NADEX?

    I think that the automatic hedging suggestion of the bull spread of NADEX (that is, this really can be an automatic hedging of your position on both ceiling and floor) is really a winner suggestion.

    This is precisely hat I desired to build in the place Currency Market but can not. It has to be on broker side.


  5. #5
    The potential of using Bull spreads to hedge with a separate spot forex account is profitable. Just a shame can't open an account with Nadex, do some non US citizens know about a way to get around this? I've been looking at numerous brokers including IG who own Nadex, and not one of them provide bull spreads (or comparable ) with the capped flooring / ceiling, this seems particular to Nadex. I've read that Nadex will open its doors to global customers soon via FCMs, but I can't find some details and they've been able to do this because 2010 but so disappointing desperate to trade on the exchange.

  6. #6
    Quote Originally Posted by ;
    quote I have been trading Nadex binaries and spreads almost daily since the end of december. Nothing but good to say so far as execution goes. The 1 thing that really does sort of suck is that the daily binaries and spreads don't become available until 4:00'm EST.. Which is 2 hours in the London open. They've intraday or two and 4 binaries/spreads that are available sooner, but those don't match my style. The other thing that sucks is you may create limit orders for entrance and exit but no discontinue orders. So there's no trailing stops. Now that I've...
    JR97 Apex Purchasing provides a free scanner for finding the finest binary or distribute on Nadex to match different traders approaches and to get a fee offers a trading plug in for stop and limit orders depending upon the option price or the indiive underlying price.

  7. #7
    Quote Originally Posted by ;
    quote Apex buying offers a free scanner for locating the finest binary or distribute on Nadex to match different traders strategies and for a commission offers a trading plug in for prevent and limit orders based upon the option price or the indiive underlying price.
    I use the scanner all the time. It's a tool that is fantastic. The plug-ins haven't been attempted by me. Never noticed them and I am on the website daily. haha . I just create my take profit order from habit today but it appears like the plug will be the ticket. Ticket. Get it? *sigh*

  8. #8
    Is anyone participating in the Nadex competition this week?

  9. #9
    One problem I have noticed with Bull Spreads is the tighter the range the more pips the inherent market must move to enter profitability, as an example in a lot of cases it is like buying or shorting in place with a 20 pip spread or longer!

    Example of what I am talking about....

    Say the spread on the Euro/Usd (Nadex Bull Spread) was 1.08-1.07 for two hours (8am-10am) and current price was at you're thinking price will probably be moving down and your looking at the price just being 10 pips from the ceiling and saying to yourself WOW! I'll only be risking 10 pips and price could move 100 pips and I'll just lose 10 pips if that comes to pass, yippee I'll take that! The only issue is the only contracts accessible could be at 1.0770 and not at the current price of 1.0790 meaning the market is going to get to move 20 pips before that contract makes its first dollar! 20 pips in place trading is a nice scalp but useless in this case.

    To get a tighter purchase spread Nadex offers wider Bull Spreads that are almost never near the floor or ceiling but the more contracts you can buy are much nearer to the spot price, usually within 1-3 pips. But Like I said the current price is usually nowhere near the floors or ceilings and you could be risking way more pips then you'd trading place plus you're just as vulnerable to market spikes as you're in place with the exception that you can't put stops on Bull Spreads and you need to sit there and monitor your trades and close them manually if closing before they expire, in which case they will close themselves at that point.

    This is an example of what I am talking about....

    Say its the start of the London session and you think the Euro/Usd will be moving down, current price is 1.0790. You will want to present your trade plenty of time to operate and Nadex will have a Bull Spread for that they have something that will not expire until 3 hours later London closes which can be est in america. However, this type of Bull Spread is going to have massive range!

    Current price is 1.0790 but the range is between 1.06 - 1.09! And if you're currently shorting in this case you're risking 110 pips or a $110.00 on one contract with no way of putting a stop loss! So if you wanted to exchange a complete lot's value of a pip just like a place trade you'd want to buy 10 contracts so that you'd be risking 10 X 110 for a total of $1100. One of the only advantages to taking a trade like this using a Nadex Bull Spread is that you could do so with an account that just had $1100 inside where as this amount wouldn't even be sufficient at 50:1 to pay the margin at a place account and you could not even execute the trade. Another and only benefit to taking a trade like this with a Nadex account is that if the price spiked for 5 mins or something....lets say 50 pips most likely you'd have had a stop loss using a place trade that would have been triggered but your Nadex commerce wouldn't have been effected. Note though that together with your Nadex commerce you'd have been sitting there watching half of your account disappearing wondering in the event that you should close or wait and see if the price will return. A stop loss in this case sounds a whole lot better to me. Also keep in mind that your Nadex trade remains match until 3 pm so if price spiked 400 pips provided that it came back before then you wouldn't be stopped out and if price did not reunite you could not go negative on your account and you'd just loss $1100. (Your whole account in this case):--LRB-

    At a place account one could also set a stop loss of 10 pips limiting your losses to $100 where from the Nadex account your whole account is a risk in this case and the only way you can protect yourself from losing your whole account is to sit in front of your computer the whole time with your hand on the mouse prepared to close the trade if price starts moving at $10 a pip with no way of putting a stop loss. Plus if price spikes to fast for you the respond you could find yourself down hundreds of dollars in seconds not knowing what to do with your complete account at risk!

  10. #10
    To irongoose,

    Couldn't you just opening an opposing limit order at your preferred price to depart?

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