By Darrell Martin
At 8:30 AM ET, on Friday, February 16, Statistics Canada will release three reports, which address topics related to foreign securities purchases and manufacturing sales. These may impact trading, thus potentially offer a trading opportunity. Such reports measure changes happening to Canada’s economy and may affect the market.
The outcome on the market for news reports of this nature is generally movement and volatility. Reactions are usually characterized by pullback following the movement. However, direction of any movement remains unknown.
Establishing a trade to collect premium and possibly profit regardless of the way the market moves may be an advantage for the trader. One such strategy known as the Iron Condor uses two Nadex USD/CAD spreads. Buy the market’s lower spread while selling the upper spread sold at the same time. The ceiling of the bought spread should meet the floor of the sold spread and be where the market trades at the moment of entry.
As the movement gives way to pullback, both spreads can profit regardless of the way the market moves. This results in a collection of premium.
Risk can be further managed toward maintaining a 1:1 ratio concerning reward and risk. Still, there is no risk beyond the floor and ceiling of spreads.
As the 10:00 AM ET expiring spreads become available for trade at 8:00 AM ET Friday, this kind of trade can be initiated. Look for a minimum profit potential of $25. This means that each spread should have at least $12 profit. Additional spread contracts may be bought and sold to generate more potential profit. Just be sure to maintain balanced entries on each side i.e., buy two, sell two; buy ten, sell ten; etc.
Traders can use this trade to become familiar with market reactions to news events. Learn by practicing in a Nadex demo account. Once proficient, traders can switch to live trading of the news. However, if the parameters of the trade cannot be met, there is no trade. Never force a trade.
Day trading education is offered free at Apex Investing.