By Darrell Martin
Sometimes evening trading can be slow. When trying to trade in the evening, checking out what news is being released can be helpful in finding trade opportunities. Market reaction to the news event can be tracked. When there is consistency in the market movement and number of pips moved, this is when the trader has the opportunity to choose a strategy from the bag of strategies to trade the event.
One strategy designed well for news trades, is the Iron Condor using Nadex spreads. It’s a neutral strategy. One that profits when the market moves in reaction to the news, and then pulls back after the move. As the market pulls back, and the time begins to expire, the trade collects premium on the trade.
Monday, October 3, at 7:30 PM ET, in Australia, the Building Approvals report will be released. This makes for an evening trade opportunity, and based on previous market reaction to this news, an Iron Condor, with a $30 profit potential or more, can be set up.
One Nadex AUD/USD spread is bought below the market with a $15 or more profit potential, and one spread is sold above the market with a $15 or more profit potential. The ceiling of the bought spread should meet the floor of the sold spread, and be where the market is trading at the time.
Below is a chart showing the profit and loss of an Iron Condor, with a $30 combined profit potential, based on where the market would be at settlement in various 15-pip increments.
In the event the market doesn’t pull back, stops should be placed for this trade at 60 pips above and below where the market was at entry. This will keep risk to a realistic $30 or 1:1 risk reward ratio. Max profit is when the market is between the two spreads at settlement and the breakeven points are 30 pips above and below. Usually news for Australia is released in the US evening time, making it good for evening trade possibilities.
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