For those of you who pay attention to the APEX news plan. You were aware the plan called for a Spread Straddle on the GBP/USD for the high impact news at 0430 Wednesday morning. I love anything with spreads and straddles. These trades present some of the lowest risk trades you can take, especially when combined with high impact news. I decided to trade the GBP/USD Spread Straddle and here is my breakdown:
You could enter as early as 1100 PM EST and use the 11PM to 0700 AM Spreads to straddle the news. I looked at about 1130 and found the combined risk was only about $21 per contract.
Next I consulted the G/U chart to identify some reasonable take profit levels. I used APEX deviation levels to help me see that there was more than enough room to expect the market to move and hit my take profits.
Now I waited. Interestingly there was a spike at about 0220 that triggered my bought side take profit grabbing me my 1:1 risk to reward.
I decided to leave on my Sold side spread because you never know, it might make money as the big news was yet to come. Its a "free trade" at the moment, no loss in leaving it on.
What do you know, I woke up with my sold side settling in the money for some more easy money!
Interesting to note: Technically it is better to wait until right before a news announcement comes out to enter your straddle or strangle so you can get the tightest straddle possible to the market. see the chart for more detailed explanation why.
Here is my TX history breakdown: (This was a live money trade)
Risked $21, made $40 per contract. Best part is unless the market settled right on 1.2750 I would not have lost all of that $21 risk.
Hope you learned something about Spread Straddles. Thanks for reading! Happy Trading Everyone!