Nadex ITM vs OTM Trades.
With nadex binary options there are only two types of trades in the money and out the money. There are benefits and disadvantages to both types of trades. Remember that nadex trading regardless of the type of trade you make can be incredibly risky and you may lose all of your original investment. It is important to understand the basics of fundamental and technical analysis.
What are in the money and out the money trades?
A in the money trade is a trade where the price action is already on the winning side of the option contract. A out the money trade is a trade where the indicative price is outside of the options contract. To find out if a trade is in the money or out the money you just need to compare the price action of the option to the indicative price. You always want the option contract to expire in the money.
Which one is better in the money or out the money trades?
Neither one is actually better. Sometimes it is better to use in the money and sometimes it’s better to use out the money trades. It all really depends on the situation. If the price action is close to support and resistance line you may want to look for a reversal and do a out the money trade. If you’re following a high volatile trend you may want to do a out the money trade. It all really depends on your strategy.
Benefits and Disadvantages of in the money and out the money trades.
The benefits of in the money trades is that if the indicative price even stays the same then you will win the contract. This makes it easier for certain strategies. The disadvantage however is when you lose you lose more money than out the money trades.
The benefits of out the money trades is that you can make more money with a smaller investment. However the price action has to move in favor of your contract. Sometimes you will be able to guess which way the market is going and that is the perfect time for out the money trades.