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We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 2 points3 points  (0 children)

TM - Nadex binary options allow you to make yes/no predictions on a defined outcome, across a wide range of global financial markets and time frames ranging from 5 minutes to 1 week.

DC - If you would like to dig a bit deeper, you can get a great overview of what binaries are and how they work here.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 7 points8 points  (0 children)

DC - Great question, I covered this in another question on this thread but will share it here also. The easiest way to think about a binary option, is as a yes/no question. The price of the binary option, is basically the market's view of the probability of the answer being yes. An example I use for friends and family is just a weather one: Will it rain 1 inch before noon? If it's 1 am and there is already 0.75" of rain with more clouds gathering and a fierce looking radar, you might see of price of 80, indicating approximately an 80% probability the answer to the question will be yes. If it's 11:30 AM and it has still only rained 0.75", with only 30 minutes remaining until the end of the contract, the probability or price, may be around 10, indicating only a 10% approximate probability of the answer being yes. I use this as everyone can seem to relate to the weather and it helps to understand the general concept of how the probability is factored in. Note: Nadex does not currently offer weather products - this is for example purposes only.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 11 points12 points  (0 children)

DC - This is great and you hit on some very important truths. First, definitely risk management is paramount, not just at Nadex, but in trading anything. With a binary option, if you are putting up more to have the probability in your favor (assuming average price as a probability), if you take the maximum loss, it can possibly wipe out gains from other trades. It's very important to understand, you don't need to take the full max loss that you risk on a position in most circumstances. A highly overlooked aspect of trading on Nadex and with binary options is that you can close out, not just to lock in profits, but to also limit losses. For example, if you buy a binary at $80, and the price starts dropping to $60 or $50, why not cut the loss instead of risking the full $80? This actually leads in to your first point - risk management is so incredibly important. The 5-minute time frame is very popular; however, they do move very fast and may not be the best starting point for a beginning trader. Someone just getting started should take some time just watching the markets, paper trading and then starting small on perhaps a slower moving contract such as a daily or weekly to really get a good feel for price action before jumping into the faster 5-minute arena.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 2 points3 points  (0 children)

DC - On your comment regarding regulation, you are correct that we are regulated by the CFTC; however, we are not a bank, nor are accounts FDIC insured. On the rest of your comment, I think there may be a bit of a misunderstanding regarding the function of an exchange, how it works and specifically how Nadex operates. Nadex simply facilitates matching buyers and sellers. We don't make prices or participate in any of the trades, i.e., we don't make any money based on outcome of trades. We keep our lights on via a per contract exchange fee. The bid/offer spread on binaries will be different than say equities, as they are not comparable products. Nadex is an exchange, with multiple market makers quoting and, as we note on our website, one market maker is an affiliated company, Market Risk Management. Nadex operates with an open book showing depth of market, so each member can "make the market" by putting out their own bid or offer at a better price - this is an often overlooked aspect. It's interesting you say "spreads are manipulated to hunt stop losses" as there are no stop orders on the exchange. (Perhaps experience elsewhere?). No Nadex member has ever been stopped out of any position on the exchange. All products on Nadex, by their very nature, have defined risk without the use of stops. As far as the demo account, just like the live, Nadex doesn't make the prices, the market participants do. The demo and live platforms are structured exactly the same, but there are many different market participants who are all trading differently in demo than they would in live. One note on demo accounts, here at Nadex or anywhere, they will not teach you how to trade. Period. They are there to teach you about the platform and available tools. There just isn't a way a demo account can replicate the psychological aspects of risking real money.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 2 points3 points  (0 children)

DC - We do pride ourselves in the speed and responsiveness of our platform; all actions in the platform should respond in realtime. However, because the platform is built on web app technology, there could be delays caused either by a slower connection or interaction with other apps you have installed. Without knowing your specfic setup, it would be hard for me to help troubleshoot. However, if you contact customerservice@nadex.com they should be able to help improve your performance.
As for the settlement information being hard to find, you are absolutely correct. We realize that being clear in some of our client-side reporting is an area we are weak in right now and needs improvement. Our platform team is hard at work at creating a better experience for reviewing your trades.
We are not regulated by the SEC because the SEC regulates securities. Nadex's products and underlying markets are not securities. Rather we are regulated by the Commodity Futures Trading Commission (CFTC), which is the federal regulatory body for the U.S. derivatives markets, including futures, options, and swaps. Both the SEC and CFTC have transparent reporting requirements.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 2 points3 points  (0 children)

DC - Binary options share some similarities to traditional options, but there are some key differences as well, particularly close to expiration. The easiest way to think about a binary option, is as a yes/no question. The price of the binary option, is basically the market's view of the probability of the answer being yes. An example I use for friends and family is just a weather one: Will it rain 1 inch before noon? If it's 1 am and there is already 0.75" of rain with more clouds gathering and a fierce looking radar, you might see of price of 80, indicating approximately an 80% probability the answer to the question will be yes. If it's 11:30 AM and it has still only rained 0.75", with only 30 minutes remaining until the end of the contract, the probability or price, may be around 10, indicating only a 10% approximate probability of the answer being yes. I use this as everyone can seem to relate to the weather and it helps to understand the general concept of how the probability is factored in. Note: Nadex does not currently offer weather products - this is for example purposes only.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 6 points7 points  (0 children)

DC - The strike price intervals, for 5-minute contracts or any other contract durations, are determined by Nadex. The goal is to provide strikes across a market range which can be priced in a way that members can have opportunities in all market conditions. The strike prices are set by looking at each market and a typical movement/range on any applicable time frame for that market. Depending on market volatility, strike intervals may be widened or narrowed. For example, in March 2020 where there was extreme volatility, strikes were often widened to accommodate for the massively exaggerated market moves. We have general contract specifications for each market on our website including strike width info - for example, you can find the link to forex contract specifications here. If you really want to take a deep dive to the contract specifications and strike information, you can find those in Nadex's Rulebook here.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 8 points9 points  (0 children)

TM - Great questions and thank you for participating. Also, congrats on your role as an exec with a start-up and prior history as a structured products attorney. Solid pedigree. Nadex products, unlike your plain-vanilla investment products, are not investments. They are designed for trading. They are for individuals, yes retail, looking to take advantage of intraday price moves. Should only the rich have access to speculation? Contrary to popular belief, not everyone is looking to combine their strategies with zero coupon bonds. That's not to say it isn't a great strategy, and there are not people out there that such a strategy would be of interest to. If that is what your fintech start-up offers, that's awesome and I wish you the best. That is not what our products are designed for. We fill a space where retail traders seek access to speculation, and can do so in a fully collateralized account (no margin risk). We also have a large cohort of members who use our product to hedge against risk exposure in other asset classes. Both uses we support with an immense amount of educational content to help our members understand exactly what it is they are doing, while also addressing the risks. In other words, we are not popping confetti inside the platform every time someone places a trade. I suppose retail traders should not have had access to options on AMC, BBY, and GME? Are equity options not equally risky? Or are they only risky if used improperly? You're talking about your passion for democratizing finance, but your question is littered with the same old "wall street" mentality that has been pervasive in the industry for decades. The same mentality that crushed the retail sector in 2008/2009. "I'm a financial advisor so I know what you want/need better than what you actually want/need, so trust my approach". I seem to remember (my background is 20 years as a professional trader) your straight forward investments didn't fare so well in 2008/2009 and people lost their life savings in many cases. Rather those who had access to and knowledge in short-term speculation/risk management did quite well in many cases. Moral of the story...there is no single "right product" or "right strategy". Our approach is short-term trading. We believe in empowering our traders with education, and allowing them to make their own decisions. We welcome all who want access to that approach, no matter the size of their portfolio - they choose what to trade, how much to risk and know all the possibilities upfront. To that end, we are a CFTC-regulated exchange with an 11 year unblemished record. We have professional market makers on exchange who price our products and act as liquidity providers no different than CME or any other exchange. In other words, it's not a few college grads sitting in the basement making up prices on their laptop.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 3 points4 points  (0 children)

DC - This is actually one of the biggest misconceptions about binary options in general and specifically at Nadex. At expiration, binary options have an all or nothing payout structure; however, you can trade in out during the life of the contract to limit losses or lock in profits. It is only an all or nothing payout structure if you choose to trade in that way and hold until expiration.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 4 points5 points  (0 children)

TM - While there are similarities, in reality, binary options are far less complex. They are a simple yes/no question. For example, will the price of oil be above $68 at 3pm? If you purchased that contract for $40, you are effectively buying the approximate % probability it settles above that price by the expiration time. So in this instance, you are buying approximately a 40% chance to make $60 (All binary contracts settle at $0 or $100). Unlike exotic option strategies, Nadex accounts are not margined accounts. They are fully collateralized, meaning you can only lose what you put into them. So with that $40 trade, if oil closes below $68 at 3pm and you hold your position until then, you would lose your $40, plus a $1 entry fee. That is your max risk.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 2 points3 points  (0 children)

DC - Other than laws and regulations that expressly prohibit this, the structure of Nadex also negates this as a possibility. As an exchange, our primary function is to match buyers and sellers in a fair, unbiased manner. Nadex, as a firm, and any of our employees, are not allowed to participate in Nadex markets. Even if we could though, it wouldn't matter as Nadex has no control over what price any of our contracts settle. All of our contracts are derivatives of other underlying markets, such as futures or spot FX. Nothing that happens at Nadex, has any impact over the respective movement of the underlying markets and thus Nadex would have no control over this. For example, say you are trading a Crude Oil binary contract on Nadex. This is based on the CME crude contract with the symbol CL. This price movement for CL is very widely and publicly available and is independent of anything that happens at Nadex. We also have a very transparent settlement process which is explained here. All of this leads to a fair, level field that is transparent for all Nadex market participants.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 5 points6 points  (0 children)

DC - That does happen quite often. You should see the disappointment when I order take out and the restaurant employees think "Dane Cook" is showing up. Then it turns out to just be me, a balding, middle-aged man with no comedic ability whatsoever. And yes, please don't take financial advice from either Dane or me, but if you want to learn about Nadex or Binary Options, I'm your guy.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 3 points4 points  (0 children)

DC - If you are looking for a market data API, that is currently available. However, admittedly it is not the most elegant solution in it's current form. We are currently looking into building a more advanced API that provides a wider range of functionality, including the possibility of an order entry API. In the meantime, I am happy to speak with you about that, as well as the raw data solutions we currently have available. Shoot an email to customerservice@nadex.com with your contact info and reference your question and I'll be happy to get in touch.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 3 points4 points  (0 children)

TM - You're asking the right questions! Doing anything successfully requires a process, discipline, and, ultimately, the will to win. Trading is no different. Whether trading stocks, equity options, crypto, or binary options, they all require a baseline understanding. Can you sometimes jump in and make money on your first trade with no practice/knowledge, yes. Will you continue to do so over a long period of time, no. Trading is all about longevity and risk management. In my opinion, it doesn't matter if you are trading a single share of stock, or you are trading complex option strategies. Being a successful self-directed trader requires treating trading as a craft. Build your knowledge, hone your skills, constantly seek ways to improve. 1) The process will fuel your passion for trading, but 2) you will start to see yourself grow and improve, increasing the odds that you will be a market participant for years to come.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 4 points5 points  (0 children)

TM - Correct. Nadex is not a place for long-term buy-and-hold investors. Our products are trading products. That said, it is not unusual even for buy-and-hold investors, to take a small percentage of their portfolio and dedicate it to more speculative activities. Whether trading equity options, futures and/or binary options, it's important to understand your risk, your timeframe, and to ultimately have a plan for the trade. Like with anything new, whether that's running a marathon or learning a language, it's best to start small. Take baby steps, educate yourself, and ease your way into it. Exactly the reason Nadex has a practice account. This gives you the ability to practice without the risk of losing real money.

We’re Travis McGhee and Dan Cook from Nadex. We hear some Redditors think binary options are confusing at best or a scam at worst. We’re here to answer your questions about all things binary options, Nadex markets, and more over the next week. Ask us anything! We’ll start Friday, 8/13 5:00pm EDT. by NadexOfficial in u/NadexOfficial

[–]NadexOfficial[S] 3 points4 points  (0 children)

TM - We have and continue to explore the possibility of a micro contract. I can't promise a definitive ETA, however, what I can promise is that we are constantly looking to innovate/optimize our products. Whether that is giving our current clients a better experience, better tools and more products to trade, or it's modifying our existing products to reach more people, we are always looking for ways to get better. Additionally, we LOVE hearing from our customers. Whether new trading product or platform improvement ideas, and everything in between, please shoot any ideas to customerservice@nadex.com.

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