By Darrell Martin
The Federal Statistical Office of Switzerland releases the Producer Price Index (PPI) monthly approximately 14 days after the end of the month. Their January PPI was down 0.4% while December and November were up 0.4% and 0.2% respectively. The PPI is important to watch, as it is a main indicator for consumer inflation. If manufacturers pay more for goods and services, these costs will normally be passed down to the consumer. This scheduled news event has seen some consistent movement in the USD/CHF market and makes for a good Iron Condor trade.
Tracking news events and market reaction to them, you can find consistencies in how markets react. When consistencies are found, then you can plan strategies that can have a high probability to profit for the next release. This particular event is scheduled for February 22, 2016, at 3:15 AM ET, the middle of the night Monday. Fortunately, the strategy using Nadex spreads can be entered the night before on Sunday, at 11:00 PM ET. That is a benefit using Nadex spreads. You can put the trade on and go to bed.
Spreads have a floor and a ceiling, which denote the bottom and top of a range in a market and the spread can be traded in either direction. You can’t win or lose past the floor or ceiling depending on which direction you traded the spread. This is an advantage because your risk is defined up front and capped. Your profit is also capped but for intraday trades, seldom do you need to worry about capped profit and you can always enter into the next range spread if need be to continue the trade. Again, this is seldom necessary.
For this Iron Condor trade, buy a Nadex USD/CHF spread with a range below the market and with its ceiling where the market is trading at the time. You will also sell a Nadex USD/CHF spread with a range above the market with its floor where the market is trading at the time. You want the spread to have a reward potential of $35 or more between the spreads. To enter the spread, you will pay the max risk upfront; however, that will not be your realistic risk. Your total risk will be a 1:1 max risk/reward ratio and you can put stops on to manage that.
To easily find your spreads at a glance, use the spread scanner available under free tools and to all traders who have a free login at www.apexinvesting.com. You will also need to open a demo or live account with Nadex, which unlike most brokers, takes only moments.
The above is an example image of the spread scanner showing possible spreads for USD/CHF. You can see that the spreads are listed down the middle with their floor and ceiling numbers and the risk/reward to sell and buy is listed to the left and right outside respectively. When you trade this news event, you can enter as early as 11:00 PM ET Sunday, the night before and look for USD/CHF spread expiration times of 7:00 AM ET. Look in the reward columns and look for spreads with approximately $17 in reward potential, as those will be the spreads to look at. Be sure the floor and ceiling requirements are there, and then you can enter. If everything isn’t there, you don’t want to force the trade.
For this trade, the market can go up or down 35 pips and those will be your breakeven points. The market can go up or down 70 pips and at those points is where you want to place your stop limit orders. Be sure to also put on stop limit orders for taking profit. When the market makes a move up or down, one side may profit. Leave the other side on and then if the market pulls back, that side could profit too. If the market is anywhere in between your breakeven points at expiration and you are still in both spreads, you will have made profit. Max profit is when the market is right between your spreads at expiration.
To view a calendar of news events and strategies to trade them visit www.apexinvesting.com. There you will find free education on trading Nadex spreads and binaries, as well as futures, forex and CFDs. Nadex is a CFTC US based exchange and can be traded from 48 different countries.
