By Darrell Martin
Periodically, the number of building permits issued by a country’s government is released. Because the permits are a key indicator showing the demand in the housing market for each respective country, it offers a potential news trading opportunity.
On Thursday, December 8, at 8:30 AM ET, Canada will release its building permits numbers. If the number is higher than expected, regard it as positive or bullish for the CAD. If the number comes out lower than expected, take it as negative or bearish for the CAD.
The last few month’s numbers have varied across the board, sometimes being a very positive percentage. Other months, they have dropped to a somewhat lower percentage than what was forecast. November’s numbers were forecast to be -0.200 percent and came out at 3.800 percent. For December, it is forecast to be 1.5 percent. In Canada, each release reports the preceding month.
Whenever there is news being released and movement is expected in the market, but direction is unknown, an Iron Condor is a strategy to consider. This strategy includes two spreads, one bought spread trading the bottom range of the market, and one sold spread trading the range directly above the bought spread. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time.
To set up this trade, each spread should have a profit potential of at least $15 for a combined minimum profit potential of $30. Enter as early as 8:00 AM ET for 10:00 AM ET expiring spreads.
The market tends to move and then pull back in response to the news event. For this kind of movement and strategy, trading Nadex USD/CAD spreads presents a high probability trade. 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.
The key to profiting in an Iron Condor spread is for the market to settle somewhere within the desired range from where it started. As long as the market settles somewhere within the 60 pip range of 30 pips above and below from where it started, the trade will profit. With time expired and the market settled between the two spreads, max profit is realized.
Free day trading education is available at apexinvesting.com.