A Low-Risk Sunday Night Trade on the Nikkei

A Low-Risk Sunday Night Trade on the Nikkei
A Low-Risk Sunday Night Trade on the Nikkei
A Low-Risk Sunday Night Trade on the Nikkei

If your work schedule doesn’t permit you to trade during the the Opening Bell in New York, or if you just want to get a jump on trading before Monday, there are a few assets you can trade on Sunday evenings. One of them is the Japan 225 (Nikkei) index with binary options or spreads.

The Japan 225 Index is available for trading at 8:00 pm EDT. When the market opens, it is not uncommon to see a large upward or downward price move during the opening hour on stronger volume.

If you spot this move, then it can open up some opportunities to trade binary options or spreads.

This was the case on Sunday, October 18. The market opened with a strong bearish move at 8:00 pm EDT:

A Low-Risk Sunday Night Trade on the Nikkei

 

 

 

 

 

 

 

 

 

 

As you can see on the 15-minute chart above, the Japan 225 market opened around 18310 and gapped-down strongly during the first hour of trading. If you wanted to trade an in-the-money (ITM) binary option, at 18350, there was no market for a trade. Even at 18310, the risk per contract was close to $90, making the premium expensive for a small return.

Given the momentum of the Japan 225, would the market continue on its downward trajectory? The decision was made to select the 8pm-10pm time frame and place an out-of-the-money (OTM) SELL trade at 18150 , risking $18.50 to make $81.50.  The Japan 225 had dropped 100 ticks in the first hour. Could it drop another 50 ticks in the 2nd hour?  Here’s how the trade played out:

A Low-Risk Sunday Night Trade on the Nikkei

 

 

 

 

 

 

 

 

 

 

The trade was placed at 8:57pm EDT. On the 1-minute chart above, you can see that the market continued on its downward path. Within 10 minutes, the market had reached the 18150 SELL strike price, and the contract was already up about $20 offering a 1:1 reward on capital risked. The Japan 225 continued moving downward to 18125 at 9:30, making the contract worth $54 in profit, but a reversal was starting to form.

The decision was made to exit the trade and lock-in profits at 9:36 for $54 per contract (exchange fees not included). That resulted in almost a 3:1 return on the $18.50 risked in this trade.

If the contract had been held until expiration at 10pm, it would have settled in-the-money exactly at 18150 for the maximum reward of $81.50. If it had settled one tick above 18150, the trade would have resulted in a loss.

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