Many reports seem to have a report and then an accompanying core report. They usually come out together. Consumer pricing is one of those reports. The Core Consumer Price Index for Canada measures the change in the price of goods and services purchased by consumers but it excludes some items in order to get a very clear trend. The Core report excludes the eight most volatile items that can distort the trend. The reports come out Friday, October 23, 2015 at 8:30 AM ET and give day traders an opportunity to trade the USD/CAD.
With news trades, it’s difficult if not impossible to know which way the market will go and how it will react. Therefore, a strategy like an Iron Condor that can profit whichever way the market moves is an advantageous one. Based on analysis done on market reaction after 12 - 24 previous reports, it was found that the USD/CAD market tends to react after the report and then pull back. The recommended profit potential is $30 or more.
Enter As Early As 8:00 AM ET For 10:00 AM ET Expirations
For this Iron Condor setup and while consulting a USD/CAD chart, you trade two Nadex USD/CAD spreads. You can enter as early as 8:00 AM ET for 10:00 AM ET expirations. Buy a spread below the market with the ceiling being where the market is trading at the time and sell a spread above the market with the floor being where the market is trading at the time.
You can open the spread scanner and see the available spreads. The spread contracts are in the middle with the Risk/Reward listed on the far left for selling the contract and the far right for buying the contract. Below you can see an example of the spread scanner listing USD/CAD spreads.
Find your spreads with the correct floor and ceiling parameters. Be sure they have a combined reward potential of $30 or more. The market will most likely make a move after the release of the reports and then pull back. One side may profit, then you can leave the other side on to give it time to play out and profit as well. Once the market has moved approximately 30 pips up or down that will be your break-even point, depending on your exact entries. At a move of 60 pips up or down the trade is at its 1:1 risk reward ratio. Again, this is also depending on your exact entries.
To learn more on how to trade Iron Condors, the news or other strategies, and to be able to access the spread and binary scanners, go to www.apexinvesting.com. Nadex is a US based, CFTC regulated exchange listing binaries and spreads which can be traded from 49 different countries.
Maybe I am confused but I am not following the instructions stated as:
It seems I would want to buy the spread below the market with the FLOOR being where the market is and sell one above the market with the CEILING where the market is. Otherwise if it goes up, and I had bought below the market, but it was already at the ceiling - there’s nowhere for it to go. Simultaneously, the other side where I sold above the market, at or near the floor, would be loosing.
Chart one here shows the graph with instructions as given
qtod the directions are correct as described for an Iron Condor (premium collection). The spread in you second pic would be called a straddle. As for the iron condor, you would not take this trade since you would only be collecting $21 in premium (see the black boxes). Per the plan you would be looking for at least $30.
Thanks Denali - I guess what was confusing is I would expect to use an iron condor in a flat market. Since the set up indicated we expected a move (up or down but not sure which), and then a retracement, I was focusing on the “move” part. And secondly, because there was not enough premium in this trade, it never clicked for me what the purpose would be. I understand now. Anyway, I did the straddle similar to the two I showed in chart two. The move was up and I lost $15 (max) on the short and profited $45 on the long. The pair never retraced so I didn’t make any back on the short, which was ok. However, if the retrace had happened, I may have profited even more.
Thanks for the links from Darrel on iron condors. I am going to study this a bit more.
qtod the news condor strategy is based off of the statistical expected move of the news event. Typically you are looking for a spike and a retrace back or better yet the market stays flat after the news comes out. The expected spike from the news is statistically not large enough to put on a straddle and make any money due to the premium you would be paying. As a condor seller you are the guy selling (collecting) the premium to the guy putting on the straddle.
At times when the premium is not there for a condor you can look at flipping the trade and put on a straddle instead (like you did), as long as you are not paying too much in premium. Based on the expected move from the CAD news I would not have put on a straddle. It looks like you paid $31 in premium which would have been your risk in the trade if the CAD closed at where you bought it.
LOL… as news goes the statistics did not work as planned for the CAD news. The straddle worked out great and the condor would have stopped out assuming you entered with at least $30 in premium. This was a big mis on the news (+.2 est vs -.3 act) and a monster 131 pip move on the CAD. The painful part for you is If you had held the spread you would have profited the full amount. You can’t complain, that was still a nice $30 net profit.
