By Darrell Martin
Thursday, February 25, 2016, Eurostat will release percentage numbers for the Final Consumer Price Index (CPI) and the Final Core CPI. Italian Retail Sales numbers will also be released by Istat. Eurostat, located in Luxembourg, provides the European Union with essential statistical information and Istat produces statistics for Italy. This news will all be released at 5:00 AM ET. Despite the early morning time of the release, this news is worthy of trading EUR/USD with a trade strategy entering the night before.
All three of these reports provide important numbers for reading inflation. However, these reports can create some implied volatility in the markets but can have a mild impact as the CPI Flash Estimate and German Prelim CPI have greater impacts being released 15 days earlier.
Using the Iron Condor strategy, you can put the trade on ahead of news as early as 11:00 PM ET Wednesday. This strategy uses day trader option spreads listed on Nadex. The spreads allow you to trade a range of the market in either direction as they have a floor and a ceiling, which you can’t win or lose past.
To set up the trade, buy a Nadex EUR/USD spread below where the market is trading but with the ceiling very close to or at where the market is trading. Also, sell a Nadex EUR/USD spread above where the market is trading but with the floor very close to or at where the market is trading. The reward potential or profit potential for each spread should be around $17 or more for a combined profit potential of $35 on the trade.
Buy Below The Market And Sell Above The Market
With this strategy, you have bought below the market and sold above the market. Therefore the market doesn’t need to move and you can make full profit at expiration. If the market does make a move, one side may profit and then as the market pulls back, the other side may profit. The market can stay in a range and you can make a profit at expiration.
Your breakeven points are where the market moves 35 pips up or down. For example, should the market move up 35 pips, then your bought spread would profit $17 and your sold spread would lose $17, depending on your exact entries. The exact reverse would happen if the market moved down 35 pips. So, if the market was in between these two points at expiration, you would profit, with the max profit being if the market was right between your two spreads.
It may seem like a high risk trade as you have to pay your max risk upfront to enter the trade. This is far from the case. Your actual risk is based on a 1:1 max risk/reward ratio where the market would move up or down 70 pips. At those points is where to place your stop limit orders. Therefore, your real risk is only as much as your profit potential. This Iron Condor strategy gives the market an astoundingly large range of 140 pips to move around in before you lose more than your profit potential.
Fortunately, based on market analysis on the past 12 - 24 releases of these news reports, it was found that the market makes a move but tends to pull back. To easily find your spreads, visit www.apexinvesting.com and use the spread scanner available free to all traders.
Apex Investing offers free education on how to trade futures, forex and CFDs, as well as how to trade Nadex binaries and spreads. Nadex is a US based CFTC regulated exchange and can be traded from 48 different countries.
