Marketsurfer, I know you know the difference.. but just to clarify for others. There's no way to exercise an option on Nadex. All options are european cash settled. You can only close your option position before expiry.
Just sell the option . ie :lets say crude is now at 86 , and you think it will settle lower than 84 , lets say the binary option price for Crude to settle above 84 is 80-85 , now instead of buying at 85 , sell the option at 80 , your risk would be 100-80=20 points and your max possible profit would be 80 . simple .
I didnt understand why it is a worthless feature . like vanilla options you could take what is on the table at anytime while are in the black and you dont need to wait till expiry to exercise the option ....
It's a "worthless" because it does not add any value to the optionality of the contract. It simply means that you can liquidate your position for the best current bid or put on an offsetting position at the offer side. Unlike for vanilla options, where American feature is usually worth very little (unless dividends are involved), a binary contract that pays out when the underlying touches the strikes at any time should be worth about twice the regular European digital.
I was talking about up/down binaries , re touch binaries as long as the strike price is reached your option will settle at 100 even b4 the expiry . But i still didnt get your point sorry , i think it is a good feature to be able to offset your position b4 expiry , unlike some binary brokers where you have to wait until the expiry , for example take anyoption they allow weekly touch binaries only during the weekend , and during the week you cant do anything but to wait , btw here is a note re anyoption touch binaries the way they determine if a price barrier is reached is a bit skewed . ie : lets say you took FB to touch 21 , what they do is they take the closing price for FB everyday during the week , if according to the closing prices your price barrier was reached then you get paid and if not then you don't , so if FB reached 21 intraday then reversed you wouldn't get paid !
You can always simply offset the position by buying a digital with the same strike but an opposite direction, even if you can't sell this one. E.g. FB was at 18 and you bought a digital that pays if FB in one week is at 20. Let's say a day passes and FB is at 20.5 - even if you can't sell the 20 strike upside digital that you own, you can buy a downside digital struck at 20 and lock in your gains. Out of curiosity, is there a retail broker that allows you to trade one-touch binaries?
Oanda had touches, fwd-starts, synthetic digitals/digital range bets, but got hit and stopped offering the products. Oanda was the only dealer open to US retail. In the EU/abroad you had SocGen's Clickoptions, but they closed. Currently it's Saxobank, betonmarkets and another large dealer that I can't recall. The large dealer is a sponsor of McLaren's F1 team... if anyone can post the info here. UBS will deal EU retail or US LLCs with >$500k.
SocGen did, which is why they were fantastic. All of my income for 3 years was made from clickoptions and UBS FX. I was going to move to London before they closed. The Euro dealer that I can't remember does FX and index, no SN. Trinitas Capital did SN, but they were offering DNTs on WMT at 85% and JNJ at 60% vola and we killed them. Same with betonmarkets. Very tight mkts, but they weren't seeing enough interest to lay the risk internally on single-name. They're probably your best bet up to $75k in index, FX and Gold. Digitals and touch markets. BOM is owned by Jim Mellon. I wouldn't go nuts, but I have relatives in Sweden holding my accounts and took 10 to 80 and they wired out in one day. They're legit.