By Darrell Martin
News for Housing Starts and Building Permits will be released Wednesday, July 19, at 8:30 AM ET. The number of new residential buildings beginning construction has declined for the past three reports. Declining amounts were also seen in the two previous reports for number of Building Permits. Both are annualized and released monthly.
“Homebuilders continue to caution that construction may be limited by a lack of available lots or skilled labor, but the market fundamentals suggest that demand should remain solid,” Tom Simons, an economist at Jefferies LLC in New York, said in a note before the last data release. In any regard, the events can make for a high probability trade opportunity.
Scheduled news events can create implied volatility (IV) in the market. With high IV, capped risk Nadex EUR/USD spreads can be traded using a strategy chosen for the typical historical market move. Based on previous market reaction, the market tends to make a move, then pulls back and settles. It’s the pullback and settling that the low risk Iron Condor strategy can be traded to collect premium and potentially profit.
The Iron Condor Using Nadex Spreads
One spread is bought below the market and one spread is sold above the market. In this way, the spreads are prepared to profit by “sandwiching” the market, so to speak. Each spread should have a minimum profit potential of around $15 for a combined minimum profit potential of $30 or more. The bought spread’s ceiling should meet the sold spread’s floor, and be where the market is trading at the time.
When looking at the spreads to determine if the trade is possible, the amount of profit potential available will tell the level of IV. If a minimum of $15 for each spread is not possible, then there is not enough IV and there is no trade. As long as the minimum profit potential is around $15 for each side, there is a trade opportunity for this setup. For quick and easy identification of qualifying spreads, traders can use the spread scanner pro, which is available to all traders at no cost. The scanner shows visual red and green risk reward bars and numbers for every spread, whether trading it long or short, for spotting them at a glance. See below.
Entry for this trade can be as early as 8:00 AM ET for the Nadex EUR/USD spreads expiring at 10:00 AM ET. After entry, stops can be entered where the market would reach 60 pips above and below from where the market was at entry. That is where the 1:1 risk reward ratio points would be for this trade.
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