By Darrell Martin
Every month retail sales numbers are released by Eurostat for Europe which gives the change in the total value of inflation adjusted sales at the retail level.
More importantly though, retail sales is the vital read of consumer spending which makes up the majority of Europe’s economic activity.
Since the report is released so early in the morning at 5:00 AM EST Wednesday, March 4, 2015, using a premium collection strategy and putting the trade on far ahead of time the night before is a great way to go. Using Nadex spreads for a neutral Iron Condor strategy makes this possible. Just put the trade on and then get some sleep. You can let the spreads expire.
The Iron Condor is a premium collecting strategy using options: in this case Nadex Spreads. Just like insurance premium is paid by the insured and collected by the company, premium in an option can be paid or collected. With this strategy the trader is essentially being the collector of the premium.
When the trade is placed, there is time value in the premium price and as time goes by and gets closer to expiration you collect it. To do this, you want to enter as early as 11:00 PM EST the night before on Tuesday, March 2, 2015 for a 7:00 AM EST expiration. The earliest you can enter is 11:00 PM and the earlier you enter the greater opportunity for time value to be in the price of the spread. To set up the Iron Condor, use Nadex spreads to trade the EUR/USD for this news event looking for a profit potential of $25.
Benefit From 24 Months of Analysis Done For You
Apex Investing analyzes news event trades and market results as far back as 24 months. They look for consistent market reaction and consistent average moves. For this news event it was found that the average move was around 25 pips on the EUR/USD. The market was found to make a move right after the report and then pull back.
For this kind of reaction an Iron Condor neutral strategy is an ideal set up. Buy a lower spread and sell an upper spread. The ceiling of the lower spread and floor of the upper spread should come together and be where the current underlying market is trading. With this setup the market wouldn’t have to move at all for you to make money.
Of course it’s expected to move but also pull back and hopefully very close or even right to the middle between your spreads where it started. It is recommended to leave your spreads on until expiration to give your trade plenty of time to play out.
The Market Can Move 50 Pips Up Or Down For 1:1 Max Risk Reward Ratio
For example, say you bought your lower spread for $13 or more and sold your upper spread for $14 or more. If the underlying market settled where the floor and ceiling came together at expiration, then that would be a maximum profit of $27.
When you are setting up your trade, if there isn’t enough time value built into the premium or prices of the spreads to give you a minimum profit potential of $25, then there is no trade.
With a trade setup of $25 profit potential, if the market didn’t move at all, you would make $25. If the market moved up or down just 12 pips and stayed there, then you would profit $13. If the market moved up or down the full 25 pips and stayed there until expiration, then you would be break even or close to it, depending on your set up.
For a 1:1 max risk reward ratio, the market would have to move 50 pips up or down and stay there until expiration. You can now see the advantages of the neutral Iron Condor strategy for ne