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It looks like the CME is giving Nadex a run for it's money. I think. The details are scant so far but it appears that the CME is launching their limited binary product offering around Sept. 19 but the detail are limited. Not sure if the Daily contracts they are offering can be traded in and out or are simply a true Binary as once you are in you are stuck until expiration. Tradovate seems to be an early Broker that will be offering to trade these products but again the details are slim as it's launch is 10 weeks out. Here is the link if you want to check it out. https://www.cmegroup.com/activetrader/event-contracts.html
Can you help answer these questions from other members on NexusFi?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
Except that its actually a trading book with market based pricing, your not trading against the house where the odds are massively skewed against you.
Given that they are only $20 contracts though, I can see how commissions will quickly kill you unless they are just pennies and I'm sure they won't be.
I have tried to find some more information these products but nothing really substantial. The CME doesn't specify whether you can trade in and out of these like Nadex or if they are static like the overseas Binary company. A lot of new products it seems are coming out this year so we'll just wait and see.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
CME is a regulated futures exchange so yes I think you will be able to trade in and out if the market is there to do that. As stated previously unlike most other Binary offerings you won't be trading against the house but against other participants in the market.
This old document has a lot more information. Of course it could have changed by now. Personally I don't see how anybody could make this work. Your going to pay $1 in fees PLUS whatever your FCM charges you and the maximum possible upside is $19.75. So if we assume 20c/side in FCM fees, the RT fees are 6 ticks when the product only has a potential price range 80 ticks!
If it's risk around $5 to make around $15, I can see how this can trap a lot of gambling traders. (let's leverage it to $50 risk to make $150, and just do that 10 times per day )
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
That's it, although it's worse than that because of commissions.
Scenario 1
Market is $9.75/$10. Commissions are 70c side (50c Exchange +20c FCM), Rather than let the position expire (and hopefully get your $20) you plan to sell at $19.75 to lock in your profits.
If you are right, you buy at $10, sell at $19.75 and pay $1.50 in commissions to make $8.25.
If you are wrong, you buy at $10, sell at $0 and pay $0.75 in commissions to lose $10.75. So you need to win 62.02% of the time to breakeven on a 50:50 bet!
Scenario 2
Same as Scenario 1, except that you don't sell at $19.75, making the extra 25c and saving you the commission if you are right.
If you are right, you buy at $10, sell at $20 and pay $0.75 in commissions to make $9.25.
If you are wrong, you buy at $10, sell at $0 and pay $0.75 in commissions to lose $10.75. So you need to win 57.5% of the time to breakeven on a 50:50 bet!
In these two scenario's I definitely want to be the house. I want the other side of those bets. Unfortunately the other side of those bets isn't the seller it's the CME!
It would appear that the market maker over at the CME is a bit greedy in there spread. I have just started to to test the waters with these event contracts
and even with a fairly safe ATM contact your profit is just not worth it as the fees are just to great on a percentage basis of profit. Not quite sure how these contracts
will morph over time but as for right now I am going to let this thing age a while.
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