Consumer spending is the major indicator for the Canadian economy, and correlated closely with spending is Employment Change and Unemployment Rate. People don’t like to spend if they’re unemployed. These two reports are released monthly and will be released Friday, June 10 at 8:30 AM ET offering a trade opportunity.
Economic news can be difficult to trade since it is unknown what the released numbers will be exactly, unknown how traders will react, and thus, how the market will move and in which direction. That is why it is important to have the right strategy and instrument to trade the event.
By looking back at past market results to the event, an average can be determined on the size of the move. For this news, the average tends to be around 35 pips up or down. An Iron Condor using two USD/CAD spreads is a strategy that is prepared to profit if the market moves up or down or stays in a range.
To set it up, a lower range spread is bought with the ceiling where the market is trading at the time and an upper range spread is sold with the floor being where the market is trading at the time. The ceiling of the bought spread should meet the floor of the sold spread. The profit potential for each spread should be around $17 or more. This is important to know when looking for the right spreads.
At entry time 7:00 AM ET, using the spread scanner and looking at the USD/CAD spreads that expire at 9:00 AM ET, find the spreads with around $17 or more profit. The spreads need to meet the ceiling and floor parameters listed. Below is a view of the spread scanner layout.
Max profit is reached for this trade after the market makes its move, then returns to center between the two spreads and settles there at expiration. The breakeven points for this trade is where the market moves 35 pips up or 35 pips down. If the market is anywhere between those two points at settlement, then the trade profits. The trade should be exited if the market moves 70 pips up or 70 pips down. Those points are where to place stops for the 1:1 risk reward ratio.
