By Darrell Martin
The Office for National Statistics will release the GBP Trade Balance Thursday, April 9, at 4:30 AM ET. The balance is the difference in value between imported and exported goods from the previous month. On occasion this report can cause traders to react strongly. Usually, however, it was found that the market has a mild reaction. A mild reaction and a return means a neutral Iron Condor can be used as a strategy.
As the title pointed out, this is a strategy to set up the night before the report comes out and can be left on until expiration. Using GBP/USD spreads at North American Derivatives Exchange, or Nadex, look to enter at 11:00 PM ET, Wednesday, the night before. The spreads should have a 7:00 AM ET expiration. Buy the lower spread with its ceiling being where the then current GBP/USD underlying market is trading, and sell the upper spread with the floor where the then current GBP/USD underlying market is trading.
Implied Volatility In Pricing
The spreads should have $30 profit potential or more. With the anticipation of the GBP Trade Balance coming out, implied volatility in the pricing of the spreads will make it possible for the $30 or more profit potential. However, if there is little implied volatility it may be that the profit potential isn’t there and then there is no trade.
If $30 seems little for profit potential, then more spreads can be traded. Just be sure to have the same number of spreads on each side of the Iron Condor. With this Iron Condor strategy, if the upper spread was sold for $15 and the lower spread was bought for $15, then the market could move up or down 15 pips, stay there until expiration and the trade would profit $15. If the market moved up or down 30 pips and remained there until expiration, then the trade would break even. For a 1:1 max risk reward ratio the market could move 60 pips and remain there until expiration.
The Average Move Analyzed Over 24 Months
Apex Investing has analyzed the average move of the GBP/USD after this report for the past 24 months, and found that it moved an average 30 pips and returned. Following its average pattern, if the market moved after the report and pulled back, the closer to the center between the two spreads the market came at expiration, the greater the profit.
Nadex can now be traded from 49 countries. To find out more about how to trade at Nadex or to trade news events like this go to www.apexinvesting.com.