Join Date: Jan 2008
Well since the news of all the regulations last year on the FTT and the current possible changes in forex I tried NADEX last year and have been trading it since. I will give my opinon as honest as I can. First off I have always liked binary options and have traded them in the past in the mid 2000s about 2004-2005. I am a US citizen and traded them overseas even though I was here in the US. That was before the port bill when attached to that bill made it hard if not impossible to fund those type of accounts. It was different trading those and you have to understand that the market makers or house is always in favor so you need to learn to trade based on that but it was a valuable instrument then. So I traded with hedgestreet also back then which is now NADEX, and they did not have a big product selection. Now NADEX has 5 currencies , 8 indicies, gold ,silver copper for metals, oil, nat gas and rbob for energies , and corn and beans for gas,
I chose to go with Nadex becuase they are a regulated exchange and in a sense of manipulation people talking about is hard when dealing with a cftc regulated exchange.
Lets first of go over the market maker situation. While NADEX is somewhat still new they have a market maker that quotes the prices for binaries and spread trades. They are currently awaiting approval to get more market makers and allow FCM's to carry the binary products. So if IB or tradestation wanted to carry binaries they can once they get approved for that designation. Right now we trade with the market makers, or we can post our own bids or offers, as and hopefully we gain volume we can begin to trade with each other as does the other futures exchanges. But as of now I have not had any manipulation on the binary prices or making money. If you read some articles about SMARTS, thats a market surveilence company that alot of firms use to watch for manipulation and NADEX uses it. So I am waiting for the approval to come through and see whom takes on binaries , I mean which fcms would offer them. Its a win win situation becuase these are all cash no margin, and their clients can use these to hedge when trading futures, but I am not sure they would be fungable but still can be used. I look forward to more marketing when they get their approval since they are not marketing right now, so the more people that trade the better we will all be, you got to start somewhere I guess. So in the respect of market makers I have had a good expierence so far.
Spreads between the bid and offer. This is not where I would like them to be, we all know binaries if right expire at a 100 if you bought or 0 if you sold. So if something is at the market it might have a 50 by 55 bid offer, which is a decent size spread. But I know that going in and I am not scalping these so its not detrimental and its still a good risk reward once you learn how to trade the binaries. But I want it lower and I think it would have to be lower for these to catch on more. I do think when more and more people trade it will get lower as well as when more market makers come into the picture. As for just volume, the more traders they have the more we post bids and offers therefore tighting the spread.
Liquidity. I have seen some comments about liquidity. It was a concern of mine when I saw different contracts had different posted bids and offer size, some were 40 on each side some were 100 on each side. Now I am not swinging for the fences but I want to make sure I can trade 20-30 lots at a time basically the equivelent of 2-3 contracts of that particluar future. So I did have days where I wouls short 20 lots on something posting 40 size and after I hit it, it goes down to 20 left but within a second or 2 atumoatically refreshes back to 40. So each time you hit it it refreshes abck to normal size, which was a good thing. But I would like to see more volume posted and hopefully we will as more trade. So the volume turned out not to be an issue. But maybe when I trade bigger and bigger size it will be but right now I am comfortable where I trade and the size I use which is what I used in futures. There are always bids and offers on prodcuts when they are in , out and at the money. When they get to far away from the money either way, they are pretty much maxed out which means you amde all the money or lost all the money you risked, but hopefully you have risk controls and not letting it get there, but as its trading there is always the same spread , it doesnt widen on you, and always has posted size. It seems to be automated.
Their charts. Well their charts are really not for use , they are there but pretty much not there. I called and asked about it and right now they are focused on getting their volume up and approval for fcms before the chart. Becuase if FCMS offer it then we can use the charts of those fcms. Basically I have been using my tradestation and ninja trader charts for trading binaries.
Trading platform. Same thing on the charts, the platform is not what we are used to as traders in futures, but it allows us to put the orders in and thats fine. I have amde many suggestions to get them up to speed on what traders thing and would need.
Ability to trade out. Unlike alot of the fly by night binary firms you see NADEX is a little different. You have the ability to trade out of the binary, you are not locked in. So I have my way of trading where certains things tell me this trade will be on to trade in and out, but remember its hard to scalp becuase of the spreads so I am not scalping for a tick or 2. Some things tell me to hold for expiration. So I myself determine which I am going to do but I do like the ability to trade in and out of the binary. As opposed to being locked into a trade.
Hours. Nadex trades and has binaries for the products I mentioned above dring the times the exchange is open reg hours, then closes and reopens at 6pm and trades throught the night till the exchange closes again, so you have oppurtunities to trade incase something happens at night or whatever. The only thing I do not like is that starting on Sunday night when most futures open Nadex is closed , it opens at 8am est time Monday morning for trading. That was an issue I and several other traders made know to them and they are on there way to taking care of that so we trading can be equivelent to other firms. That hopefully should happen soon.
So in all despite peoples talk about spreads and liquidity, I think binaries are great to trade, I have always loved them. They can be traded with alot of peoples current strategies. Just need to spend some time to look at all the little things you need to know about binaries, its not really about the cost when you trade on for expiration. So traders who have an open mind might do well, and it does alleviate a lot of stress. If I trade the sp500 or es, and I want to make 500 bucks, it has to move enough to make me 500 bucks, but in the binaries it only has to expire one tick above the binary strike you chose. There are many strikes to choose from. Its not for everyone, and I am sure there are some people that might bash them. I am not here to convince anyone to trade binaries, I trade them and love them. But I was trying to give my opinion of NADEX and trading binaries for those in the states. I have tried a few others that allow you to open up accounts but shady when it comes to regulation and safty of money. Thats why I like nadex for the transparency. I am not affiliated with them nor work for them. I spent most of my time on elitetrader if you read my posts trying to fight the financial trasnaction tax bill from last year, thats what made me try and find an alternative trading incase that ever went though. In doing that I jumped in more and more into binaries. Sorry this is so long.