By Darrell Martin
Automatic Data Processing, Inc. (ADP) releases early information on employment growth monthly for the US. ADP has the information at hand from handling the payroll services of US corporations, which includes some 400,000 customers. The ADP Nonfarm Employment Change release for last month will be come out Thursday, July 7, at 8:15 AM ET and makes for an opportunity to trade EUR/USD using Nadex spreads.
The strategy for this news event is an Iron Condor neutral, premium collection strategy. Two Nadex EUR/USD spreads are traded, with the expectation of the market making a move but pulling back to where it started, or close to it. One spread is bought below the market, with the ceiling being where the market is trading at the time. The other spread is sold above the market, with the floor being where the market is trading at the time. The ceiling of the bought spread should meet the floor of the sold spread.
Entry for this trade can be as early as 7:00 AM ET, for the two-hour 9:00 AM ET, expiring spreads. Each spread should have a profit potential of approximately $15 or more, for a combined profit potential of $30 or more. Just after the numbers are released, the market will react and make its move, and then pull back.
As time expires and the market moves back closer to where it started, the trade will begin to collect premium and show profit. As long as the market stays between the breakeven points, where the market would hit approximately 30 pips up or down, and is between those points at settlement, the trade will make some profit. When the market pulls back to right between the two spreads, and is there at settlement is max profit. For a visual of breakeven, profit and loss points, see below image.
To view a larger image click HERE.
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Stops should be set in case the market makes an unexpected move and takes off in one direction. According to the image, the 1:1 risk/reward ratio is when the market moves up or down 60 pips and stops should be placed at these points.
For free trading education and access to the spread scanner for trading Nadex, visit www.apexinvesting.com.
