Life Hacks For Binary Options

In Blog by Michael Arnold


Binary trading has gained much press and notoriety, with some of it being positive and some of it being negative but not much of it being truly informative. This was the state of the foreign exchange markets (forex) as well, 6 years or so ago prior to Dodd-Frank making it much less attractive for U.S. retail accounts to trade Forex. But the forex markets, like binaries today, were mostly misunderstood. Forex is a market and like any market or industry, there are some unscrupulous parties. Same with binary options, which is why we never mention binary options without also mentioning Nadex, a CFTC regulated binary exchange. That’s right; Nadex is an exchange, just like the CME Group or the New York Stock Exchange. Nadex is NOT a binary option broker. So how does a potential trader get ahead trading at Nadex? By understanding the products, which can be done with the proper trading “hacks”.

A trading hack is similar to a life hack, which is a modern term taken from computer hacking.

Hack-verb: To use a computer to gain unauthorized access to data in a system. Today, a “life hack” as a term, covers shortcuts and loopholes which aren’t obvious but make life a bit easier. So whether it’s knowing how to get a table at the best new restaurant in town, or how to get a seat in the second exit row in a 747 (the one that reclines), life hacks are potentially applicable for everyone. This includes trading hacks. While Nadex binary options are yes or no propositions, are you aware that you can exit your binary trade before expiration at Nadex? This makes Nadex binaries behave more like a traditional call option in terms of pricing. Nadex spreads are similar to vertical debit call-spreads in traditional options. Are you aware, not only of option greeks, but on how they work to help or hurt the profitability of the trade you have placed?  Do you know not only what Nadex spread to put on, but what the current market conditions are and based on that, where in the spread to place the trade? There are times when buying at the floor price is a good trade, but also times when buying near the ceiling is a good trade, despite the skewed reward to risk that appears on your order ticket (remember, you can exit Nadex trades prior to expiration, so the risk on the ticket represents the MAX risk, not a level of risk you are forced to take). Are you aware of intrinsic and extrinsic value?  Did you know there is a spot in a Nadex spread that is the cheapest place to put on the trade in regards to extrinsic value?

These trading hacks will not make you instantaneously profitable, but they will help you understand the products you are attempting to trade. Placing real money trades in a product that you don’t understand is akin to driving a car with no view of the road. Nadex binary options and spreads are easy to use products, but you still need to be able to see the potholes in the road.

Futures, options and swaps trading involve risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results