How to Trade Binaries With Only 15 Minutes A Day (Series 2 of 4)

In the "How to Trade Binaries With Only 15 Minutes A Day" Series 1 article you learned how to use diagnostic bars, with expected volume, and expected range channels to trade with only 15 minutes a day. In series 2 you will learn how to apply this system to make money on binaries using this system by making money on time.

 

How to make money on time with binary options with Nadex binaries:

Making money on time with an option is known as premium collection. As you are collecting the time value in the option.

 

A binary option has a value of $0 to $100. Nadex binary options has strike prices.  If you buy a binary the price you buy at is the risk and $100 less that price is the maximum profit potential. If you sell a binary option the price you sell at is the profit potential and that price less $100 is the risk. You can do 1 or 100's of contracts at a time depending on your account size and risk management method.

 

If you buy a binary option that has a strike price under the underlying markets price then if the market stays flat, moves up, or moves down but still expires above the strike price as of expiration you will be profitable on the trade.

You can also do the inverse. So If you sell a binary option that has a strike price above the underlying markets price then if the market stays flat, moves down, or moves up but does not stay above your binary strike price as of expiration you will be profitable on the trade.

 

If doing a buy side premium collection Nadex binary option trade follow these simple steps

1) The market (ie ES S&P 500 Emini Futures) is at 1835 at 9:45 AM and the system gives you a buy signal. ((A) Actual Volume exceeds expected volume in the last 15 minutes, (B) with an up close bar, (C) and the subsequent bar breaks that bars high).
 

2) At 9:45 AM you buy a nadex binary US 500 > 1833 @ 10:00 AM (meaning you are stating that The S&P 500 will be above 1832 as of expiration 15 minutes later

     You buy the binary for a cost of $70.00 therefore the risk is $70 and the profit potential is $30

     Why would you do a trade with that kind of risk to reward ratio? Probability is the main answer. Remember the market is already above your strike. It can stay flat, it can move
     up, it can move down a lot and come back or just move down a little and you still will be profitable. The only scenario where the trade looses if held to expiration is if it goes
     down multiple points and stays down in the next 15 minutes.

 

     Now it is important to remember you do not have to hold the binary until expiration. This is a huge benefit of trading on Nadex. If the market moves up. So you can exit when the
     binary hits the value of $95 for a @25 profit. Likewise if the market came down to your strike at $1833 you cold exit for $50 (less a few dollars on bid/ask spread say $47. This
     would allow you to have a risk of $23 and a profit of $25 giving you a much better risk to reward ratio. Now if the market stays flat, moves up, or does not move down more than
     a few points in the next few minutes you will be profitable on the trade. If it does move down then you have a 1:1 risk/reward ratio on the trade but over a 70% probability on the
     trade (matching the price you purchased at $70 as 3/4 scenarios you will profit on the trade. 
  

 

3) So in this case it expires at 1836.75 above your 1833 strike. Therefore you are profitable on the trade at either $30 or $25 if you took profit before expiration which is always
    always a wise plan. 

 

Used with permission from Apex Investing Institute LLC ApexInvesting.com

Also you can do trend collection (make money on movement) with binaries for a much higher payout on this strategy or you can combine the premium collection and trend collection together for what is known as a double binary. We will discuss applying these 2 additional binary strategies in follow up articles. 

 

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