What do ticks, points, and pips mean?
Ticks, points, and pips are units of price movement in financial markets. Futures market prices are counted in points, subdivided into ticks. Forex prices in the spot currency market are counted in pips.
Points and ticks
Ticks are the smallest increment a price can move in any market. Depending on the market and Nadex contract, tick sizes and tick values may vary. Points, used with futures based contracts such as indices and commodities, are counted by the first digit to the left of the decimal point. Points are made up of ticks. Depending on the tick size of the market, points may be made up of one, four, or even 10 ticks.
Binary option tick value and tick size
All Nadex Binary Options have a per point value of $1.00. However, the minimum price increment, or tick (the smallest possible price move), is 0.25, or $0.25 per contract.
For binary options: the tick size is 0.25, for a tick value of $0.25 per contract. There are four ticks per point, giving binary options a per point value of $1.00. With a range of 0 to 100, binary options have a total value of $100 per contract.
Nadex Knock-out and call spread tick value and tick size
For Nadex Knock-out and call spread contracts, the tick size will vary depending on the underlying market, but the tick value is always $1.00. Again, the tick size is equal to the minimum increment the price of a contract may move.
Unlike futures, in the spot currency market prices move in pips. Pips were traditionally the smallest increment of price fluctuation of any currency pairs. Depending on the currency pair, and the current exchange rate of the two currencies, the pip value as expressed in USD could vary quite a bit.
To simplify this, Nadex Knock-out and call spread contracts based on forex pairs have a tick size equivalent to the pip size in the spot currency market. However, regardless of the pair being traded, the tick value is always $1.00 at Nadex.
Minimum tick and value comparison examples:
|Contract name||Tick size and value||Underlying market||Tick size and value|
|Crude Oil||0.01 = $1||NYMEX® Crude Oil Futures||0.01 = $10|
|US 500||0.1 = $1||CME E-mini S&P 500® Index Futures||0.25 = $12.50|
|Wall Street 30||1 = $1||CBOT E-mini Dow® Index Futures||1 = $5|
|EUR/USD||0.0001 = $1||Spot EUR/USD exchange rate (mini)||0.0001 = $1|