By Darrell Martin
News on US Building Permits and Housing Starts will be released on Friday, June 16, at 8:30 AM ET. The numbers are annualized reflecting the number of new residential building permits issued and buildings that began construction. These reports can be leading indicators for the economy as the building of a house supports many jobs and services throughout the process. This news presents a low risk trading opportunity for traders trading Nadex spreads with capped risk.
Typically, the market tends to either range or make a move and pull back in reaction to this news. Based on that kind of movement, an Iron Condor strategy can work well. The setup includes two spreads. One spread is bought below the market and one spread is sold above the market. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time. Each spread should have a profit potential of $15 or more for a combined profit potential of $30 for the trade.
There is no loss past the floor or ceiling in any spread. To further manage risk however, stops can be set up. The 1:1 risk reward ratio for this trade is 60 pips above and below from where the market was at entry. Entry can be as early as 8:00 AM ET for 10:00 AM ET expiration.
The chart below shows what the profit and loss would be on each spread if the market settled at any of the different 15 pip marks. Top profit would be the market returning to where it was at entry and being there at settlement.
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