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Low risk, even lower probability, but high reward strategy


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#1 marijan993

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Posted 17 June 2013 - 08:45 AM

This is work in progress, opinions, critics, suggestions are all welcome.

 

Strategy uses bull spreads.

 

 

1. open outer spreads.

2. make limit orders, that way the risk is 1$ per spread.

3. open middle spread.

4. place order with price between outer spreads. 2 orders, both buy and sell.

 

Low risk:

Total risk with this strategy is within bid/ask spread.

 

Even lover probability:

Strategy requires the market to move on either side a lot to trigger it.

 

High reward:

Once triggered, the strategy should make money on both sides.

 

Attached File  1.jpg   131.8KB   7 downloads

 

The tear-off ticket shows middle spread.

The working orders show outer spreads.

 

 

I haven't tested this, it is still only an idea,  all feedback is welcome.

 

Kind regards,

Marijan



#2 KAPITAL

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Posted 22 June 2013 - 04:15 AM

At what price do you decide to take the middle spread and in what direction?



#3 nadex girl

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Posted 22 June 2013 - 03:07 PM

great idea..will definately try...best time to try it should be when market is moving pretty fast.....up and down



#4 marijan993

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Posted 23 June 2013 - 10:01 PM

At what price do you decide to take the middle spread and in what direction?

 

You would take both direction, both sell and buy middle spread. You would do this at the same price as outer spreads.



#5 KAPITAL

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Posted 24 June 2013 - 02:15 AM

You would take both direction, both sell and buy middle spread. You would do this at the same price as outer spreads.

 

Are you saying that you would buy the middle spread at 1.3331 and sell it at 1.3329?  If so, when your buy trade is executed, what would be your take-profit?  You would have to exit the buy trade first before executing a sell trade on the same spread.



#6 marijan993

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Posted 24 June 2013 - 07:17 AM

Are you saying that you would buy the middle spread at 1.3331 and sell it at 1.3329?  If so, when your buy trade is executed, what would be your take-profit?  You would have to exit the buy trade first before executing a sell trade on the same spread.

Yes, I would buy the middle spread at 1.3331 and sell it at 1.3329. I haven't still worked on the  profit level,  for now I'd hold it till expiry. As I said in my first statement, this is still work in progress.



#7 KAPITAL

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Posted 02 July 2013 - 02:45 AM

Yes, I would buy the middle spread at 1.3331 and sell it at 1.3329. I haven't still worked on the  profit level,  for now I'd hold it till expiry. As I said in my first statement, this is still work in progress.

 

Are you aware that you can't have active buy and sell trades on the same strike at the same time?  It sounds as if that is what you are attempting to do in this scenerio once price reaches your limit orders.

 

Am I right or wrong in how I perceive you statement?



#8 marijan993

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Posted 02 July 2013 - 07:45 AM

Are you aware that you can't have active buy and sell trades on the same strike at the same time?  It sounds as if that is what you are attempting to do in this scenerio once price reaches your limit orders.

 

Am I right or wrong in how I perceive you statement?

Yes, I am aware that I can't have active buy and sell trades on the same strike at the same time, that would be hedging. I have worked on this (as I clearly stated, this is still work in progress) but forgot to post it.

 I came up with two possible solutions for now:

 

1. either take only one middle spread ( than it would be possible to profit in only one direction)

 

2. take two middle spreads with different expiry ( then we get the same possible outcomes as originally imagined, but one middle spread may have shorter expiry). This solution would be good for news events, as it needs big and fast moves due to different expiries.

 

Again, this is still work in progress,  so opinions, critics, suggestions are all welcome.



#9 marijan993

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Posted 02 July 2013 - 07:55 AM

Just poped in my mind: a good idea, which potentially solves all problems is using daily spread as the middle one! Yes, there would still be differece between expiries in middle spreads , but the middle spread with shorter expiry would have the same expiry as outer spreads, not shorter.



#10 apexinvesting

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Posted 04 August 2013 - 11:37 PM

Very cool idea. However, the challenge would be getting a fill on this contract (at least on live) due to premium, fees, and bid/ask spread. For someone to take the opposite side of the trade they would essentially be okay with a $1.00 reward (and they have to pay a $1.80 in exchange fees) so they would be guaranteeing themselves a loss. 

 

The trade would have to be insanely OTM ( price way outiside the spread) or decently OTM and very close to expiration not giving it a lot of time to move.

 

The price would need to be significantly higher than a $1.00 risk 



#11 bravester10

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Posted 08 January 2014 - 06:48 AM

Anyone have any luck with this ? I dont think the outer spreads would ever trigger except when very close to expiration like Darrell explains above.



#12 marijan993

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Posted 08 January 2014 - 01:22 PM

Anyone have any luck with this ? I dont think the outer spreads would ever trigger except when very close to expiration like Darrell explains above.

 

Hey bravester10

 

I haven't touched Nadex in a long time since I'm not in the States and Nadex is (still) only available to US residents. I don't even remember how would this work, but as I stated, it was only an idea, which I abandoned due to previous stated reasons. If or when Nadex become available to non-US residents, I might look at this again. I'm not sure if anyone else tried to put this to work.

 

Kind regards,

Marijan



#13 acuter

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Posted 08 January 2014 - 07:51 PM

Interesting idea , but  as  Darrell  said , (  and   h e  should  know ),  it's  both  challenging   , and  rather  problematic .

 

I appears  that  every  facet , or step , has  to  be in  place  at  the  right  time ,  and   perfectly  timed .  Rather  daunting , but  not

 

 unsurmountable .

 

Stay with  it  Marijan ! 






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