By Darrell Martin
There are different kinds of reports released on a monthly schedule, which can be traded. Expectation of volatility or Implied Volatility can inflate leading up to these news events affecting option pricing providing trade opportunities. Friday, July 15, at 9:15 AM ET, the US Capacity Utilization Rate and Industrial Production will be reported. Traders watch these numbers. The first gives a percentage of available resources utilized by manufacturers, mines and utilities and is a leading indicator for inflation. The second measures the change in total inflation-adjusted output produced, making it a leading indicator for production and economic health.
The unknown of the news release tends to inflate the implied volatility leading up to the announcements. Once the news is out however, and information is now known, and implied volatility can drop and tends to sharply. This kind of market scenario makes for great Iron Condor trades using Nadex spreads with capped risk.
For this trade opportunity, buy a EUR/USD spread below the market with the ceiling being where the market is trading at the time. Also, sell a EUR/USD spread above the market with the floor being where the market is trading at the time. Enter at 8:00 AM ET for 10:00 AM ET expirations. Learning to trade spreads and finding the right spreads for a strategy can be done easily using the spread scanner designed specifically for trading Nadex. Both spreads should have a profit potential of $15 or more for an approximate $30 or more profit potential. See a visual of the scanner below.
With the expected movement of the market as making a move and then pulling back, due to the implied volatility, the buying below the market and selling above the market Iron Condor strategy can work well. The trade makes max profit when the market returns to center between the spreads. Stops should be placed in case the market takes off far enough and does not really return. The 1:1 risk/reward ratio points are approximately 60 pips above and below, depending on your exact entries and exact profit potentials.
Free education and scanner access is available at www.apexinvesting.com.
