Trade The Ivey Purchasing Managers Index Release


#1

By Darrell Martin

Numbers from approximately 175 surveyed purchasing managers make up the Ivey Purchasing Managers Index (PMI) report for Canada.

Managers are selected geographically by sector or activity and are asked to rate employment, production, new orders, prices and inventories. This information is key insight into the health of the economy and conditions that cause businesses to quickly react.

This report comes out monthly and has a record of consistently moving the USD/CAD market by approximately 35 pips and then returning or pulling back.

Apex Investing found these results after 12 - 24 months of analysis and shows a high probability trading opportunity with the neutral Iron Condor strategy.

Enter As Early as 9:00 AM EST for 11:00 AM EST Expiration

The release comes out on Thursday, March 5, at 10:00 AM EST. Using Nadex spreads, you can trade the USD/CAD entering as early as 9:00 AM EST for an 11:00 AM EST expiration.

To build an Iron Condor you buy a lower spread with its ceiling where the current underlying market, the USD/CAD is trading. Then you sell an upper spread with its floor also where the current underlying market is trading.

The floor and ceiling will come together right where the current underlying market is. Since the average expected move is 35 pips, that is the profit potential you want to look for when setting up the trade, $35 or more.

For example, you could buy a lower spread for $18 and sell the upper spread for $20. That would give you a max profit potential of $38 for both spreads combined. You can always trade more spreads; just be sure to keep the numbers equal on both sides and enter at the same time.

Once the news is released, the market will move and then pullback. If it pulls back and returns to where it began or settles right between your spreads at expiration, you will make your max profit.

The spreads can be left on until expiration to give the market plenty of time to return. The market doesn’t actually have to move at all for you to profit if it remains right between your spreads. In this example if the market moved down 10 pips and remained there until expiration you would make $20 on your sold upper spread, but only $8 on your bought lower spread.

If it moved up 38 pips, then you would profit $18 on the lower spread but lose $20 on sold upper spread for a net loss of $2. The market could move 76 pips and you would still have a 1:1 max risk reward ratio.

Make Sure To Get The Recommended Profit Potential

For this strategy you want at least a $35 profit potential. If there isn’t enough implied volatility in the market and built into the price, then it will be difficult to find this and there would be no trade.

If you placed an Iron Condor on for only $20 then that may not be enough room for the market to move, return and then for you to profit. Right before news events however, implied volatility can increase making for good opportunities to find the profit potential you want.

Apex Investing has a news calendar for scheduled events as well as strategies to trade them. If you want to find out more about trading the news with Nadex spreads you can visit www.apexinvesting.com.