What do Current Price and Underlying Market Price mean?

The current price of a market is the price of the last recorded trade on that market. It allows buyers and sellers to estimate the price of the next transaction.

It is similar to the market price, also called the underlying market or indicative price.

On Nadex, "market price" or "indicative price" refers to the price of the underlying market, not the current value of the binary option or spread based on that market. 

 
 

The next trade may differ from the current price since changes in supply and demand and other factors may have happened since the last trade. It will be whatever price the next buyer and seller agree upon.

Traders sometimes refer to the current price as the “print,” from the days when orders were recorded on paper. The first trade of a session, after the opening bell, is called the opening print and its price serves as the first data point in certain calculations.

Underlying market

The market a derivative is based on is called its underlying market. While a derivative such as an option or binary option may be based on, for example, the S&P 500® stock index futures, the price of the option doesn’t move in synchrony with the underlying price. Its price is based on the buying and selling interest of traders. Sometimes, a small move in the underlying can cause a large move in the option and vice versa.

For example, if the current price of the underlying market is just below the strike price of a binary option at expiration, that binary will receive a zero payout. But if it moves slightly above the strike price, the binary will get the full $100 payout at expiration.

Derivatives are instruments for trading whose price is based on the price movement of some other market. That market may be a futures contract, a forex pair, an economic number, or a price index. Derivatives can even be based on intangible numbers like the weather (temperature, precipitation, storms), the price of real estate, or mortgages.

Real-time market price data

You can go online to get free delayed quotes, which are useful for some analysis, but you can’t trade successfully in real time if you give the rest of the market a ten-minute head start. 

Live market pricing usually has a cost associated with it. Stock and commodity exchanges charge a fee for their price and volume data, which brokers pass on to their clients.

Nadex offers free real-time price and volume data as well as bid/offer price and size.

The Nadex indicative price

On Nadex, the price quotes are live but rather than tracking only the most recently printed trade, Nadex uses a continuously updated average of the most recent prices.

This price is called the indicative price or underlying indicative price, since it is designed to accurately indicate the current market price in a way that is useful for traders.

The calculation is the same one Nadex uses to calculate the expiration price (which is compared to the strike price), but it’s done on an ongoing basis during the life of the contract.

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