By Darrell Martin
One of the Principal Economic Indicators listed on the Federal Reserve homepage is Industrial Production and Capacity Utilization. These are news reports being released by the Federal Reserve on Friday, June 15, 2018 at 9:15 AM ET.
Industrial Production measures the change in the total inflation-adjusted value of output produced by mines, utilities and manufacturers. Manufacturing Production narrows its report to include only manufacturers. Both reports are forecast to be lower than their previous reports.
News will likely cause some amount of movement in the markets. However, direction and amount of movement are unknown. Because of this, consider using an Iron Condor strategy, which can profit as long as the market moves in one of three ways. It can move and pull back. It can remain where it is, not moving at all. Or it can move slightly. The trade will be profitable as long as the market is between the breakeven points at settlement or when the trade is exited.
To set up an Iron Condor trade for this news, simply use Nadex EUR/USD spreads, entering as early as 8:00 AM ET with an expiration of 10:00 AM ET. Buy the market’s lower spread while selling the upper spread at the same time. The ceiling of the bought spread should meet the floor of the sold spread and be where the market trades at the moment of entry. Each spread should have a profit potential of at least $15 for a combined minimum profit potential of $30.
The breakeven points for this setup, with a $30 profit potential, are 30 pips up and down from where the market was at entry. The market can be anywhere in that 60 pip range.
If the market moves 60 pips up or down from where it was at entry, the trade would hit 1:1 risk reward ratio points. This means at those points the trade would lose approximately the max profit potential amount, which in this case is $30 for the trade.
When trading Nadex spreads, risk is capped at the floor and the ceiling of the spreads but risk can be further managed with stops. For this trade with a $30 profit potential, if the market takes off and moves 60 pips above or below from where it was at entry, it will reach the 1:1 risk reward ratio points. That is where to place stops.
In this trade, also consider the level of implied volatility. If it is high in the market, then there will be more profit potential available in the spreads. Likewise, if volatility is low, there may be very little profit potential. In that case, there would be no trade.
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