With recent spikes in volatility and markets having big swings in both directions over the past couple of weeks, Wednesday’s Fed announcement on interest rates could have a dramatic impact on this week’s market action.
Nadex provides binary options on a variety of underlying indices, commodities, and currencies. When you’re scanning the market for profitable trade set ups, you can consider the many ways to trade with binary options, especially for expected news events.
Here is a chart of the indicative index, which is based off the CME E-mini S&P 500 December Futures contract, as of 4pm ET on Monday afternoon. Along the right axis are some of the available weekly binary options, which expire at 4:15 pm ET on Friday.
Let’s take a look at 3 possible trades in just this one index using weekly binary options.
Bullish for a move upward in the markets prior to Friday’s close? You can buy a binary option above the current market. One binary option you could choose is to buy the >2,150 binary option for $34 with $66 of potential profit if it expires in-the-money for a full value of $100. The S&P would have to move about 18 points by the week’s end for this trade to be profitable.
Bearish for a downward move in the S&P prior to Friday’s close? You can sell a binary option below the current market. One binary option you could choose is to sell the >2,114 binary option for $66.75. In this trade you would have $33.25 of risk with $66.75 of profit potential, with the underlying index about a similar 18 points away from being profitable.
Have no directional bias and expect a big move either way? Buy a binary above the market and sell a binary below the market. You could buy the same >2,150 binary option for $34 and sell the same >2,114 binary option simultaneously for $33.25. You would have a combined $67.25 of risk with a potential profit of $32.75 if the indicative index expire above or below those levels. While you are risking around 2 to 1 in this trade, you are profitable if the market closes about 18 points away from current levels in either direction by Friday’s close.
With 4 full trading days remaining in the week, these are just 3 examples of possible trading strategies you can use on the Nadex Exchange. Active markets are the best time to learn, so this is a great time to open a demo account at Nadex and see for yourself the types of trading opportunities that are present on a daily basis in a variety of products.
Note: Exchange fees excluded for calculations.