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Nadex Review

Nov. 7, 2016
Brokers, Investing, Investments
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The world of binary options is a small one: If you want to invest in binary contracts, you should do it through a regulated exchange — and in the U.S., there are very few choices. Nadex is one of them.

The company offers binary options trading on a range of markets, from forex to economic events, and charges just $1 per side for each contract. There is a $50 fee cap, though it doesn’t apply to trades that expire “in the money.”

Most importantly, Nadex is regulated by the U.S. Commodity Futures Trading Commission and operates as an exchange, which means the company matches contract buyers and sellers rather than taking one side of the trade itself.

This is key: The binary options industry, if you can call it that, is a scam-filled one, crawling with offshore brokers that are illegally accepting money from U.S. residents. That money may be kept in offshore accounts where it is difficult to access, and these companies frequently bet against their customers, profiting off trades that go bad.

For that reason and a simple lack of demand, most of the big guys in the U.S. brokerage industry — the companies that frequently land on our “best of” lists and populate our brokerage tools — have stayed out of binary options. Because the selection of U.S.-regulated competitors is small, we’ve chosen not to award a star rating in this review. However, Nadex is the best exchange for binary options trading in the U.S.

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Quick Facts

  • Commission: $1 per contract, per side ($50 cap; no additional fee on 51+ contracts; cap doesn't apply to trades that expire in the money)
  • Account minimum: $250

Nadex is best for:

    • Binary options traders
    • Large selection of markets to trade
    • Free demo trading account
    • Binary options education

Nadex at a glance

Commission$1 per contract, per side, with a $50 maximum. Cap doesn't apply to trades that expire "in the money." No settlement fee on losing trades if held to expiration.
Account minimum$250. Account must be funded via checking account.
Account fees (annual, transfer, closing, inactivity)$25 returned deposit fee.
Trading platformBrowser-based. Free demo account.
Mobile appYes, for iOS and Android.
Research and dataFree
Tradable markets• Stock indexes (Wall Street 30, U.S. 500, U.S. Tech 100, U.S. SmallCap 2000, China 50, FTSE 100, Germany 30, Japan 225)
• Commodities (gold, silver, copper, crude oil, natural gas, corn and soybeans)
• Economic events (Federal Reserve funds rate announcements, weekly jobless claims, nonfarm payroll)
Customer support/branchesEmail and phone support 24 hours a day from Sunday 11 a.m. Eastern to Friday 5:45 p.m. Eastern.

Nadex features you should know

Educational resources. Nadex really brings it in the trader resources department, offering four educational courses that cover the basics of binary options and trading strategies. The company also hosts regular webinars, offers trading handbooks and has a large YouTube library of explainer videos that will be really valuable to binary options beginners.

No fee to close losing trades. Nadex charges $1 per contract, per side, for up to 50 contracts, which means in most cases, you pay that fee when you open the contract and when the contract settles. The cap does not apply to trades that settle “in the money,” which means you’ve profited.

But if you hold the contract to expiration and it settles “out of the money” — which, as you might guess, means you lost — Nadex takes pity on you and waives the settlement fee, meaning the trade costs a total of just $1 per contract.

Permanent demo account. Want the thrill of trading without the losses? Smart. Nadex offers a permanent demo account, which means you can fake-trade the markets to your heart’s content without ever losing a dime. Demo accounts are common among brokers that offer complex investment products — especially forex brokers — but Nadex stands out by offering an account that never expires. That means you can continue practicing with dummy money even after you’ve funded a real Nadex account.

Free accessible trading platform. The trading platform isn’t the most advanced we’ve ever seen, but it certainly does the job, and it’s free to all customers. The software is browser-based and offers free real-time data and intuitive trade tickets. Charts are available next to each contract, and traders can place orders within the same window. The company also has a mobile app that allows for charting.

Nadex also offers something called Market Order With Protection (MOP), which lets you set a tolerance for how far outside the market price you’re willing to pay. The order defaults to a $10 range for binary options, but can be adjusted in your account settings. If the market price creeps past your selected range, the order will be canceled.

Large market selection. One of Nadex’s few regulated competitors is Cantor Exchange, which offers contracts on gold, Atlantic named storm landfalls and a very small selection of currency pairs. Comparatively, Nadex offers a number of stock indexes, forex pairs, commodities and economic events.

Is Nadex right for you?

Here’s the deal: We can say without hesitation that if you want to trade binary options in the U.S., you should do so through a regulated exchange. Among the choices available, Nadex is the winner, especially for casual traders and beginners. The company seems to cater to that audience, with helpful educational resources, no inactivity charges, reasonable contract fees and a permanent demo account.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @arioshea.

Updated March 9, 2017