Risking $1 For Every $15 of Potential Profit

Risking $1 For Every $15 of Potential Profit

Risking $1 For Every $15 of Potential Profit
Risking $1 For Every $15 of Potential Profit Getty Images

It’s Friday and it’s a big day in Washington with a vote expected in the House on the republican healthcare bill. All reports indicate that the bill will have trouble passing, but as we all know anything is possible when it comes to politics and the market these days. Whether the House passes the bill, fails, or pulls the bill before the vote, there should be some fireworks in Washington today and we will see if that uncertainty spills over to the market in the form of volatility.

Whether you’re bullish, bearish, or market neutral there are trading opportunities for all methodologies in binary options. What kind of risk vs. reward are you looking for and what kind of movement are you anticipating in the Nasdaq 100 today before the 4:15 p.m. ET expiration?

Nadex offers binary options on a variety of indices, commodities and currencies with varying time expirations. Here we see a chart of the US Tech 100 Index, which is based off the CME® E-mini Nasdaq 100 Futures price, as of about 8:15 a.m. ET this morning. Along the right axis are some of the binary options available that expire at 4:15 p.m. ET today, leaving about 8 hours.

Risking $1 For Every $15 of Potential Profit

If you’re looking for a large move in either direction for the Nasdaq 100 then there are a variety of binary options to choose from, all of which include defined risk. Let’s look at possible trades if you were looking for a large move in either direction prior to the market’s close this afternoon at 4:15 p.m. ET. If you expected the Washington healthcare vote to send the markets spiraling downward then you could sell an out-of-the-money binary option. If you sold the >5,314 binary option at $93.75 then you would be risking $6.25 for a potential profit of $93.75. You would essentially be risking $1 for every $15 of potential profit. In order to be able to get such a ncie risk vs. reward set-up, the market is currently sitting 50.1 points away from being in-the-money. To put that in perspective, that’s not even a 1% decline. Remember, because you’re selling the “>5,314” binary option strike price, if the underlying market closes at exactly 5,314, or below, then your position expires in the money.

While trades such as this one are going to end up as losses far more often than they will be profitable, you can see how rarely you need to be successful to still be profitable in the long run. There are similar trades that can be made to the upside as well if you expect the market to bound before the 4:15 p.m. close on Friday afternoon. Regardless of what side of the trade you decide to go for with binary options you will always have defined risk, and in fast markets that can be any trader’s best friend.

To see for yourself the types of defined risk trading opportunities on the Nadex Exchange open a demo account today and they’ll provide you with $25K of practice funds to experiment with before investing any of your hard earned real cash. There is plenty of uncertainty across the world right now, and that uncertainty could provide for fast move in a variety of markets. Be ready for the next great trade by opening a Nadex account today!

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 instruments include forex, stock indexes, commodity futures, and economic events.

Nadex binary options and spreads can be volatile and investors risk losing their investment on any given transaction. However, the limited-risk nature 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.