Philadelphia Federal Index Trading Opportunity


By Darrell Martin

Published on the third Thursday of the month, by the Philadelphia Federal Reserve Bank is the Manufacturing Index. It is sometimes referred to as the Philly Fed Index, Philadelphia Federal Index or the Business Outlook Survey. It is a survey that covers the Pennsylvania, New Jersey and Delaware region. It measures changes in business growth constructed from participants who voluntarily answer questions about the change in their overall business activities.

If the data compiled reveals a level above zero on the index, this indicates improving conditions; if below zero, it indicates worsening conditions. This report is characterized as being of high importance. Last month’s reading came in at 34.4. This month is forecast at 29.0. If the reading comes in higher than expected, it is regarded as positive or bullish for the USD. If lower, it should be taken as negative or bearish for the USD.

On June 21, 2018 at 8:30 AM ET, the release of this report presents a trading opportunity. Using Nadex EUR/USD spreads, traders can set up an Iron Condor strategy. This strategy allows traders to be ready to make a profit should the market move slightly in either direction or move and then pull back or stay in a range.

Nadex spreads have capped risk. The amount put up to enter the trade is the total risk. There is no margin required so traders cannot lose more than the amount put in.

Two spreads are needed for an Iron Condor. Buy a lower spread below the market with its ceiling where the market is trading at the time. Simultaneously, sell an upper spread above the market with its floor where the market is trading at the time. Since the release is at 8:30 AM ET, enter as early as 8:00 AM ET for the 10:00 AM ET expiration.

Target a minimum profit potential of $35. Do not force the trade if unable to find $16-18 rewards for each spread. Take only the best entries allowing for a higher probability to profit.

Depending on where the trade is entered, the breakeven point for this trade will be where the market hits 35 pips above or below entry. Anywhere else in between those points will bring profit, as time gets closer to expiration.

One side of the trade may profit before the other side. If the market moves past the breakeven points, one dollar is lost for each pip past breakeven depending on exact entry. Max profit is made when the market is right between the two spreads at expiration. The market can move approximately 70 pips up or down from entry for the trade to be at a 1:1 risk reward ratio.

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