Nadex fees: How much does it cost to trade?
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Nadex (North American Derivatives Exchange) is a US-based trading platform that deals with short-term Forex, indices, and other commodities trading. It is well regulated and legitimized by the CFTC (Commodities and Futures Trading Commission).
Nadex provides a slick new medium to facilitate and participate in short-term trades and is worth looking into. In this article, we explore the pricing options surrounding Nadex and go into depth about the different kinds of trades it offers.
What you will read in this Post
Trade Commodities Offered By Nadex
Nadex trades on majorly three types of commodities, namely-
Relating to the relative values of international currencies. The charges for executing such trades remain the same as explained above. Opening trade costs $1, and so does closing it. It doesn’t cost anything to let the option expire after it has been opened.
Relating to trends and movements within the stock market, controlled by a few prominent companies. The drastic market makes for a good basis for futures trading. The charges for executing these trades are the same as Forex.
Relating to the values and prices of commodities such as gold, oil, and others. The charges remain the same as Forex and indices. Trades such as XAU/AUD are user-friendly and easier to get started with.
Nadex Membership and Fees
Nadex marks a sharp divide between two categories of traders, usually dependent on the volume of trades and money in their accounts. The Direct Trading Members comprise the bulk of the trading traffic, and the other category being the Market Makers, which deal with large value transactions. We’ll look at their fees one by one.
Direct Trading Members
Nadex has no initial membership fee. Although creating an account requires a minimum first deposit of $250, there are no subsequent minimum account balance requirements. There is a $1 fee for opening or closing one single trade, i.e., you get charged 2$ for opening and then closing an option.
You can have as many contracts open simultaneously, provided you pay a dollar for opening them. Waiting till the contract expires does not cost a dollar, meaning you can close your options by just waiting for them to expire.
Nadex provides out-of-the-money settling, which removes charges directly from your Nadex balance. The other option is to get cash or in-the-money settling.
There is no fee for out-of-the-money settling. In-the-money settling will set you back one dollar for each contract you are settling. Suppose the Nadex settlement fee is greater than 0$ and ends up becoming a bigger value than the actual settlement payout.
In that case, Nadex will reduce its fees to be the same as the payout, therefore ensuring Nadex never asks for a payment greater than the withdrawal amount when you withdraw money.
In the case of a dormant account with no trading activity for 12 months, a fee of $10 will be deducted from the account’s balance every month. If an account balance drops below $10, the inactivity penalty will be reduced and still charged until the account reaches a balance of zero.
In the event of the user becoming active again, the dormancy fees remain non-refundable. Nadex can also terminate an account with zero balance if it shows no sign of activity for a long time.
Nadex has no initial membership fee for Market Makers. Creating an account calls for a minimum deposit of $500,000 and a constant minimum balance of at least $250,000. As we can tell, these have high trade volumes, and hence the costs of opening and closing trades are different.
The cost of opening or closing a binary or spread option is 70 cents, and the cost of opening or closing a knock-out option is 50 cents. We will discuss these types of options in detail. This fee applies only to those Market Makers who Nadex does not intermediate.
Nadex is open to being approached for partnership by such entities and will not charge anything after that for opening or closing trades.
There is no fee for out-of-the-money settlements. 0.70$ and 0.50$ are the prices for settling binary options and knock-out options in-the-money, respectively. Similar to Direct Traders, Nadex will never charge a fee that exceeds the settlement payout.
A special surcharge for Market Makers exists solely on Binary options. If your profit per contract is more than $2, then 50% of your profit above $2 per profit is taken by Nadex per month. This is applicable solely for Market Maker members.
FCM (Futures Commodities Merchant) Member
The third type of trader is the FCM (Futures Commodities Merchant) Member, who trades on behalf of a small group of people. The fee structure for them is as follows:
There is no initial membership fee. Creating an account calls for a minimum deposit of $100,000 and maintaining a minimum balance of at least $50,000. These are also high-volume trades. The fee stays at 35 cents per side of a contract, i.e., opening and closing for the first ten trades opened and becomes free after the 10th one.
There are no settlement fees for settling out-of-the-money. A charge of $0.35 per contract settled in-the-money is applicable. Unlike Money Makers, the same price is applicable for all trading options.
Now that we are familiar with the basic costs of getting set up on Nadex, let us look at some of the trade options and their costs.
Nadex Trade Options And Cost
Binary options work on a simple premise. If your prediction regarding the price of an underlying asset in the market is above a certain threshold (the strike price), you earn profits for the prediction. Binary options work in a simple yes or no boolean scenario and are essential to extremely short-term and fast trading.
Binary contracts on Nadex range from 0-100$ price and profit range. You might get a 0 settlement, meaning you lose your initial payment to buy the position (not inclusive of the 1$ opening transaction fees), or a 100 position, meaning you receive a 100$ payout (minus the transaction fees)
Spread options work in a broader range as compared to binary options. Instead of a single strike price, you work within a range with an upper and lower cap. If you close your option within the time, the asset’s price remains within your range; you profit from it. The cost of settling a trade is $1 per contract.
A wire withdrawal would cost you $25.
Knock-out options are a variant of spread options that are more short-term and unique to Nadex. In this, if the asset price ever crosses the upper or the lower cap, the option gets immediately and automatically closed, hence the name knock-out. It is safer than spread options as your profits are capped but so are your losses.
The cost of settling a trade is $1 per contract. A wire withdrawal will cost you $25, whereas debit card withdrawals are free. Nadex will never charge you more than your settlement amount.
Nadex Withdrawal Methods And Cost
Money transfer takes place using a real-time money transfer service. This is an option for people dealing with Nadex from outside of the US. It is the only option remaining to such people at times, and there is a brutal charge of $25 per settlement withdrawal.
It also holds that Nadex will never charge more than the withdrawal amount. It is possible to request a wire withdrawal or fund your account using wire transfer from 4:15 PM ET Monday to Thursday. Other requests get processed by the next business day.
Wire withdrawal for non-US users, i.e., international traders who are not citizens of the US, there is a withdrawal fee of $25.
ACH withdrawal/Bank Withdrawal
ACH funding is capped at $500 per transaction. Nadex uses third-party software for verification called Plaid, which simplifies the verification and transfer process.
Once you register with Plaid, you will need to log in to your bank through two-factor authentication such as an OTP. Your bank account will then get linked with your Nadex account, and you can transfer funds at the click of a button, with a cap of $500 per transaction.
Nadex doesn’t charge any fees for ACH withdrawals.
Debit card withdrawal
This remains the fastest and easiest way to deposit or withdraw from your Nadex account. It requires only a debit card registered in a valid, regulated, and license-holding US bank.
It is possible for a non-US trader registered on Nadex to create a bank account in a US bank and use its debit card for funding the Nadex account. This eliminates the $25 charge for international users.
The limit for withdrawal is equal to the last amount funded by you. $10,000 is the limit on a single transaction, and $50,000 is the daily limit for a single account.
The best and most accessible part about Nadex is the option to perform trades within a demo account that does not use real money. This helps you diversify your trades as you can learn the intricacies of other trades you might not usually dabble with without losing money in the learning process.
Nadex claims to have limited risk potential, but short-term trading securities in actuality have no upper-risk limit. These trades offered by Nadex contain the potential to severely hamper you financially in the event of contracts going sour or some market calamity.