Nadex Pricing: What’s Included in a Direct Trading Account?

Thanks to digital technology, virtually everyone can join the trading game. One of the most accessible types of trading is binary options. This is because of many reasons. One, the initial entry price is smaller. Two, it is very simple. As the name suggests, a trader will only get two outcomes: earn a fixed amount or gain nothing at all (and lose your trade capital). Three, there are many binary trading platforms available.

The problem, however, is not all of them are safe to use. Many times, exchanges will trade against their clients. This is why many traders flock to Nadex. The exchange is well regulated by the Commodity Futures Trading Commission (CFTC) and is obligated to adhere to its strict requirements. Moreover, Nadex does not take the opposite side of client trades.

If you, like many people, are inclined to try the platform, we will get into the Nadex pricing plans and what’s included in them. Moreover, we will also have an overview of the Nadex platform features that make it unique and a go-to binary options exchange.

The popularity of binary options trading has come a long way since it was introduced by the Chicago Board Options Exchange (CBOE) in 2008. Since then, many brokers have introduced their own binary trading platforms to fill the surging demand. However, there was a conflict of interest in this setup, which runs deep between platform users and brokers. Both sides were betting against the other, taking the opposite side of trades.

Thus, true peer-to-peer trading was needed. This void was first filled in 2009 by the North American Derivatives Exchange (NADEX). The exchange entered the fray and launched binary financial instruments covering popular markets. These include stocks, commodities, and Forex. Not only is it regulated by CFTC but it also never participates in the trades. Hence, it took care of the perennial conflict of interest between traders and brokers by matching buyers and sellers.

On Nadex, over 10,000 hourly, daily, and weekly contracts are being traded. This takes place five days a week on both desktop and mobile devices. As a part of the North American unit of the IG Group, it is an FTSE 250 global firm with a market cap of around $7.25 billion as of November 2021.

Overview of Nadex

Nadex is a top US binary options exchange. Aside from the usual binary option contracts, it also offers two innovative financial instruments via its platform. These are Knock-outs (Touch Bracket™) and the Nadex Call Spreads. Thanks to its friendly interface, these contracts are easily understandable and better suited to individual traders.

Through these financial instruments, Nadex allows users to participate in top global markets using a singular account. These include popular stock indices like Wall Street 30 and FTSE 100; forex pairs like EUR/USD and USD/JPY; commodities like Metal and Energy; and even economic events like GDP and unemployment rate.

Trades can be very flexible and can suit the trading styles and preferences of individual traders. In fact, there are ultra short-term options that last from five minutes to five days. Hence, users can seize the potential in even the smallest market movements.

For users who are not familiar with binary options trading, the company has many learning resources available. Its learning center is full of educational articles, blogs, tutorials, and other learning materials. Furthermore, Nadex offers a free demo account with $10,000 in virtual funds that new users can use to practice.

In addition to its web-based platform, Nadex is also available through its native mobile apps for both Android and iOS devices.

Moreover, the barrier to entry is virtually zero with its $0 minimum initial deposit. There is no maintaining balance as well. All contracts from binary options to call spreads only have a $1 trading fee and a $1 expiration fee.

Types of Nadex Contracts

1. Binary Options

A binary option contract offers users two options with two outcomes. The contract allows them to speculate on the price movement of markets. On Nadex, this includes (1) Forex, (2) Stock Indices, (3) Commodities, and (4) Events. Like other exchanges, binary options contracts have three key elements: the market, the strike price, and the expiration date and time. Basically, users just guess whether the market will be above a certain price—the strike price—after a specific time. It is essentially a yes or no question.

On Nadex, contracts are formatted so that you can only have two outcomes. Your position either settles at $100 (minus your cost for trading) or $0. As the price is always between $0 and $100, you can only ever lose as much as you put up for the trade. Thus, many traders enjoy this type of contract because of its defined risk and clear outcomes. The setup is well suited to individual traders.

Should you want to exit the trade early, you can do so by placing another order to close your position. As such, you will be able to lock in on your profits or limit your losses.

Moreover, you get no-fuzz Nadex pricing. The exchange only charges a $1.00 trading fee per contract and a trade expiration fee for in-the-money (above the strike price) of the same amount. For out-of-the-money positions, Nadex doesn’t charge any settlement fees. Again, you only lose as much as you put in the trade.

Lastly—and another neat thing about Nadex—it doesn’t charge a settlement fee that exceeds your total payout. For instance, if your position is “in-the-money” at expiration with only a $0.50 payout, the exchange will only charge you $0.50 instead of the usual $1.00.

Regulated by CFTC: Safety Is Top Priority

Nadex is secured and regulated by the Commodity Futures Trading Commission (CFTC), making transactions safe. Member friends are kept in segregated accounts in US banks. And unlike other binary options providers, the exchange does not take any position in the markets like taking the other side of the trades of members.

Access live Nadex Market Data

2. Knock-Outs (Touch Bracket™)

Knock-out trades, also called Touch Bracket™ on Nadex, last for a week. This gives users a good amount of time to wait and see if their position is correct. What is unique about them is that they allow users to set a floor or a ceiling.

The floor is usually the level that ensures you don’t incur big losses. But when you are selling a contract or going short, the floor serves as your level of maximum profit potential. On the other hand, the ceiling is the level for you to lock in your profits. This is, of course, when you are buying the contract. But if you’re going short, then it is your level of maximum risk.

Put simply, the floor and ceiling are essentially your stop loss and take profit levels. If these set parameters are hit, you will automatically get knocked out of the trade even before the contract has expired. Thus, users can protect their wins or limit their losses.

So, with a knock-out contract, you can just “trade and go.” This means you can leave your contract alone as you are assured of getting out of the trade whenever your set floor and ceiling have been reached. Whether you are bullish or bearish, this protects you from incurring big losses.

Just like binary options and all Nadex products, your maximum loss is limited to what you invested in the trade. Also, you can lock in your profit or stop your losses by opting to exit a knock-out contract early. Entry or exit before expiration only costs $1.00. And if your position settles in-the-money at expiration, at let’s say $0.50, the exchange will only charge you $0.50 instead of $1.00. Thus, you will never lose more than what you put in the trade.

Defined Risks

On top of that, the platform offers its users defined risks for their trades. This means users get to know their maximum profit and loss upfront even before they put a trade in place. In this way, users do not lose more than the initial cost that they put up. Also, the platform provides users with more controls over their trades like managing and closing positions early to lock in profits or limit losses.

Nadex is fitted with useful charts and indicators together with useful explanations

3. Nadex Call Spreads

A call spread is a trading strategy where a trader buys or sells an equal amount of call options simultaneously. Also, there are many types of call spread strategies that traders can take advantage of. Among these are neutral, bull, or bear markets. The strategy provides a way to create a built-in floor and ceiling that show the prospective value of a contract along with its defined maximum risk and profit. This, however, can be quite complicated. Furthermore, traders have to choose from a virtually infinite range of price points and strike levels.

This is not so on Nadex.

What is unique about Nadex Call Spreads?

The platform features unique and simplified Nadex Call Spread contracts. Unlike conventional call spreads, Nadex Call Spread contracts are packaged as a single unit. Thus, there is only just one price to consider when making your decision. This takes the complex planning and complicated execution off the table, making it suitable for the individual trader.

Nadex Call Spreads have short contract durations, from two hours to a week, and small contract sizes. Thus, users have many options when it comes to time value and risk. The contracts also have a bi-directional structure where you just buy if you think it is going up or sell if you think it is going down.

Also, like knock-out contracts, they have a built-in floor and ceiling so a contract can have a defined risk outright. The price level where you bought the contract subtracted by the floor level is your maximum risk. When selling, the ceiling level minus the price level where you sold represents the maximum of your trade.

Possible Outcomes

There are three possible outcomes for this type of contract. If the contract expires and the price is above the ceiling, you get the maximum profit. Conversely, if the price is below the floor, you will take the maximum.

If it expires between the floor and ceiling, you either earn a profit or take a loss depending on how much the price has changed. Of course, it will be in the range between your maximum loss and maximum profit.

Moreover, like other Nadex financial instruments, you can choose to close a trade to limit your losses or lock in your profits. Like Knock-Out contracts, entry or exit before expiration only costs $1.00 per contract.

A demo account showing Nadex Call Spread contracts with built-in floor and ceiling

A Trading Platform for the Individual Trader

Trading is really made simple by Nadex. It offers simplified versions of complex and complicated financial instruments that are perfect for the individual trader. Moreover, thanks to its comprehensive learning center, novice traders can slowly build their technical analysis skills and improve their trading intuition. Another great thing about the trading platform is that there are instructions and definitions available. Thus, users don’t have to change tabs or windows to learn what features mean and what they are for. This is true for built-in indicators like Bollinger Bands, Stochastics, and Relative Strength Index (RSI).

Plus, as mentioned, the platform provides a free demo account for users to hone their strategies before risking real money on live trades. Of course, the demo account also uses live trading data. This is all available for free as you can create your Nadex account with no minimum deposit and no maintaining balance. With it, you can easily create an account, start learning, or start trading away.

Moreover, not only does Nadex offer a very minimal barrier to entry. The transaction fees are also very affordable:

Transaction Information

• Returned Deposit/Chargeback – $25.00
• Wire Withdrawal – $25.00
• ACH Withdrawal – Free
• Account Setup – Free
• Deposits – Free
• Debit Card Withdrawal – Free
• Dormant Accounts (no activity for 12 consecutive months): $10.00 per month
  • No account will become negative
  • A dormant account with a $0 balance may be terminated

Lastly, it is good to note again that Nadex is regulated by the CFTC, making it one of the safest ways to do binary options trading. So if you are new to trading or want a simpler, more flexible solution, Nadex is an excellent choice.

By Jenny Chang

Jenny Chang is a senior writer specializing in SaaS and B2B software solutions. Her decision to focus on these two industries was spurred by their explosive growth in the last decade, much of it she attributes to the emergence of disruptive technologies and the quick adoption by businesses that were quick to recognize their values to their organizations. She has covered all the major developments in SaaS and B2B software solutions, from the introduction of massive ERPs to small business platforms to help startups on their way to success.