Design this system for NADEX


I trade on NADEX. On NADEX, you can trade an instrument called a ‘spread’ (also called a ‘bull spread’). What is a spread? Here is an example:

US 500 (Jun) 1970.0-2050.0 (4:15PM)

This means that this spread is based on CME E-mini S&P 500 Index Futures (Jun) contract. It specifies a range in the value of that contract. On NADEX, this contract ticks in increments of .1 and a tick of .1 = $1. So, if I am long 1 contract in this spread and I entered at 1990 and the underlying moves up to 1991, then my position has profited $10.

So, the range of 1970 to 2050 defines the floor and the ceiling of the spread. In order to trade this contract, you need to put up the maximum amount that you can lose if you are wrong on the direction of the trade. Lets say you go long at 1990. It means that you could lose a maximum of 20 points of movements. Since .1 point of movement = $1, it means that you could lose a maximum of $200. So, the cost to enter this trade would be $200.

Suppose you went short at 1990. Since the ceiling is 2050, it means that your maximum risk is the 60 points of movement about your entry point at 1990. Again, since .1 point of movement = $1, the maximum risk on the short position is $600.

On NADEX time is a factor. In the example given above, the spread contract has an expiry time at 4:15pm. It means that at 4:15pm your position is closed out and you end up with either your profit or your loss. Suppose I was short at 1990. The underlying CME E-mini S&P 500 Index Futures (Jun) contract drops precipitously to 1950. 1950 is 40 points below where I entered, but I don’t get that whole 40 points of profit. The floor of the contract was 1970, so, I get a profit of 20 points. Once again, since .1 pt = $1, I get $200 profit at expiry.

At any time, you can get out of the position. It isn’t necessary to wait until expiry. If the underlying drops to 1980, I can get out and bank a profit of 10 points = $100.

So, I would like to see a system designed around the spreads on indices that are traded on NADEX. In order to be viable, the system would need the following characteristics:

  1. Trades the CME E-mini S&P 500 Index Futures or one of the other underlyings available for trading with the NADEX Indices spreads: CBOT E-mini Dow Futures, CME E-mini NASDAQ 100 Index Futures or ICE Mini Russell 2000 Index Futures. Lead months for all underlyings: Mar, Jun, Sep, Dec
  2. Enters trades between 6pm EST and 4:15pm EST with the idea that the expected movement must happen prior to expiry of the NADEX spread at 4:15pm EST on the current day.
  3. No trades held beyond 4:15pm EST on any given day.
  4. Trades 1 unit for every trade.

Other requirements go without saying such as: must be profitable!

Anyone up for the challenge?

How about the bid/ask spread, transaction fee, and liquidity? I looked at this earlier and didn’t see much possibility except for small traders.

Here’s an order ticket for a spread on the S and P 500 expring tomorrow at 4:15pm.

You can see the underlying is at 2006.667. You could buy or sell 50 contracts at the indicated bid or ask. If I bought 50 contracts at 2007, I would have to put up $18,500 which is the maximum loss on the trade.

Furthermore, if I were to buy all 50 contracts in the order book, 50 more contracts would appear momentarily, etc, etc.

Thanks for the info. I try nadex more than 5 times to realize each time that is not for me. They push it so hard on advertising. I quit, but if it wrks for you, I am happy.

lejeune Bauvil for Wugot strategy.