The Bureau of Labor Statistics will release the US PPI and US Core PPI at 8:30 AM ET Friday, September 11, 2015. The PPI is the Producer Price Index, which gives a percentage of price change for finished goods and services sold by producers. This is a leading indicator for consumer inflation due to higher costs being passed on to the consumers when producers’ prices increase. The Core PPI is the PPI but excludes food, energy and trade due to the three of those making up 40% of the PPI. These reports on Producer Prices will be the last before the FOMC meets again September 16-17 and announces any change in interest rates.
How To Trade The Release Of These Reports
The PPI actual numbers were greater than what was forecast the last three reports and the Core PPI last two reports were greater than what was forecast. There is a strategy to trade these reports looking for a conservative profit potential of $25 or more using Nadex EUR/USD Spreads. The strategy is an Iron Condor trading two spreads, one on the lower side of the market and one on the upper side of the market. Spreads have a floor and a ceiling, which allow for capped risk and profit. You can’t lose or profit past the floor or the ceiling depending, of course, on if you are long or short the spread. The advantage to trading an Iron Condor strategy with two spreads is that the market can go either direction and you can still potentially profit.
If $25 seems too low of a profit for you, then you can always put more spreads on as long as you have the same number on each side of the market. To set up your Iron Condor, you want to buy the lower spread with the ceiling being where the market is trading at the time of entry. You will want to enter at 7:00 AM ET with 9:00 AM ET expirations. You also will want to sell the lower spread with the floor being where the market is trading at the time of entry. This setup will put the lower bought Nadex EUR/USD Spreads ceiling meeting with the floor of the sold upper Nadex EUR/USD Spread and right where the market is trading at the time.
Trade Setup Must Meet Trade Parameters Or No Trade
Be sure to take the trade only if you can meet all of the above parameters. The distance between your entry price and the ceiling will be your profit potential on your bought spread and the distance between your floor and your entry price will be your profit potential on your sold spread. For this scheduled news event, based on market analysis on 12 - 24 months of market reaction after reports, it was found that the market will react but then usually pulls back. This is why the Iron Condor strategy with a $25 profit potential or more is recommended.
The max profit point is when the market moves and then pulls back right to center between your spreads. You can leave your trade on until expiration giving it time to play out and make its way back to center. For every tick away from center the market is at expiration, it is only less $1 in profit. Depending on your entry prices, if the market moves 25 pips in either direction and is there at expiration, you will be break even on you trade. One side of your Iron Condor would lose while the other side profits. The market can be 50 pips in either direction from center of your Iron Condor at expiration and you would have a 1:1 risk reward ratio.
To learn more about Nadex Spreads and Binaries and how to trade them please visit www.apexinvesting.com. There you can find a full calendar of scheduled news events to trade as well as strategies.
