By Darrell Martin
Canadian Building Permit news is coming out Tuesday, January 10, at 8:30 AM ET. A Building Permit is the first step to begin building, making this news an excellent view of future building. This report can be traded using Nadex USD/CAD spreads in an Iron Condor strategy. With an 8:30 AM ET release, this trade can be entered as early as 8:00 AM ET for 10:00 AM ET expirations.
Past reaction to this news has shown the market to make a move and then pull back making an Iron Condor strategy perfect for this kind of move. To set up for this trade, simply buy a lower spread below the market and sell an upper spread above the market. Each spread should have a profit potential of $15 or more for a total combined spread of at least $30. The floor of the upper spread should meet the ceiling of the lower spread and be where the market is trading at the time.
The profit potential is based on the average of previous moves. However, price normally leads news. So, there may be more or less profit potential. If the profit potential isn’t there, then there is no trade. Stops should be placed after entering in the case of the market taking off and not pulling back. If that happens, stops should be placed where the market would hit a 1:1 risk reward ratio point, which for this trade is 60 pips above and below from where the market was at entry.
The chart below shows how the different points where the market settles affects risk and reward.
Looking at the chart, the first column shows the move of the market and where it is at settlement. The last column shows what the total profit and loss would be if the market settles at those points. The other columns show the results for the individual spreads. For this trade, based on a $30 profit potential, the market settling anywhere between the breakeven points of 30 pips above and below, will bring profit. More contracts can be traded as long as the trade is balanced with the same number on each side.
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