High Probability Overnight Trades With Binary Options

High Probability Overnight Trades With Binary Options

The Fed minutes were released on Wednesday and they showed that many members of the Federal Open Market Committee believe a rate hike next month would be appropriate. Markets accelerated higher and indices finished up about 1.5%.

High Probability Overnight Trades With Binary Options
High Probability Overnight Trades With Binary Options Getty Images

If you are looking for high probability trades then binary options could offer another choice when scanning the market for possibilities.

Below is a chart of the Nasdaq 100 at 7:15 p.m. Eastern Time on Wednesday night.

High Probability Overnight Trades With Binary Options

If you wanted a high probability trade then you could purchase a binary option for the Nasdaq 100 to close above 4,612 on Thursday at 4:15 p.m. Eastern Time for $84.75. There are exactly 21 hours remaining until expiration. As long as the Nasdaq closes above 4,612, which is about 44 points under the current market, your trade will show a profit of $15.25.

Because you’re risking $84.75 for a max profit of $15.25, you would need to be correct about 6 out of every 7 trades in order to be profitable assuming you held this position until expiration. You would be risking about $5.56 for every $1 of potential profit. Remember that you could always cut your losses and use a stop-loss of around $50 should the Nasdaq 100 approach the strike place level of 4,612 at any point tomorrow. When a binary option is trading at its strike price the market will be at about $50, minus the bid/ask spread (there is theoretically a 50/50 chance that the underlying market will close on either side of that price when it’s trading exactly at that level).

If you used a stop-loss of $50 then you would only be risking $34.75 for a max profit of $15.25. This would bring your risk vs. reward down to $2.28 risked for every $1 of potential profit.

This is an example of a high probability trade that you can place overnight. Don’t confuse high probability with highly profitable. The profitability of this trade will depend on the market direction and your trading methodology.

You are going to be correct much more often than you’re wrong in the position I talked about, but you also have to keep in mind how much more you are risking vs. your potential max reward. As long you are properly managing your risk vs. reward, binary options can be a profitable way to make high probability trades in the markets.

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.