By Darrell Martin
Tuesday, February 16, 2016, National Statistics is releasing numerous pricing numbers revealing the state of the economy for the UK. Of high importance is the Consumer Price Index measuring price changes of goods and services purchased by consumers. When consumer prices go up the inflation can be a cause of concern for the Central Bank to raise interest rates. For these reasons, traders watch this report. The expected market movement and pull back can make for a good Iron Condor trade using Nadex GBP/USD spreads.
Along with the Consumer Price Index (CPI), the Core CPI, the Producer Price Index (PPI), the Core PPI, the Retail Price Index (RPI), and the House Price Index (HPI) will all be released as well at 4:30 AM ET. Using Nadex spreads for this trade strategy allows for putting on the spread as early as 11:30 PM ET the night before for 7:00 AM ET expiration. Nadex spreads have defined capped risk. A floor and a ceiling of a spread mark the area of a market you can trade long or short. You cannot lose or win past those points. When entering you put up the max risk of the spread; however, that is not the real risk of the trade. You can have stops and exit at any time. Also, note Nadex GBP/USD ticks in pips and every pip is worth $1 on Nadex.
With implied volatility built into the market, you can often find spreads with premium before and sometimes after news events. For the Iron Condor recommended for this news event, based on market reaction after 12 - 24 months of reports, the profit potential for this Iron Condor should be $35 or more combined between the spreads. You want to buy a Nadex GBP/USD spread approximately 17 pips or more BELOW the market and have the ceiling where the market is trading at the time. You also want to sell a Nadex GBP/USD spread approximately 17 pips more ABOVE the market and have the floor being where the market is trading at the time.
Once the reports are released, the market tends to react, move and then pull back. It can often settle right where it started out. The strategy of the Iron Condor, buying a spread below and selling a spread above, is preparing for the market to do exactly that kind of move. The market can also just stay where it is and not move at all and you would profit. There is a wide area for the market to settle at expiration where you can still profit. The market can move up 35 pips before it hits the upper breakeven point and it can move down 35 pips before it hits the lower breakeven point. For every pip closer to the center of your spreads the market settles, that is $1 profit for you.
The spread scanner was designed by traders to find these spreads easily at a glance. It is also available for all traders to use at www.apexinvesting.com. You only need a free login and a demo or live account with Nadex. Both take only moments to open. Below is an image of the spread scanner with a list of GBP/USD spreads.
You can see the spreads are listed down the center showing their floors and ceilings. On the outside are listed the risk/rewards. To easily find your spreads at 11:00 PM ET the night before, open the scanner and choose the GBP/USD market, look for spreads expiring at 7:00 AM ET, look in the reward column or the premium column for $17 or more and once found, verify the spreads’ ceiling and floor parameters are correct as stated above. They should be correct, if you found spreads with $17 premium.
The trade also has a 1:1 risk/reward ratio point should the market really take off. If the market moves up 70 pips, you should exit and that is where you should place a stop limit order. If the market moves down 70 pips, you should also exit and have a stop limit there as well.
To find out more about Iron Condor strategies or how to trade Nadex binaries and spreads, options for day traders, just go to www.apexinvesting.com. Nadex is a US based exchange and is regulated by the CFTC. You can trade Nadex from 48 different countries. Apex Investing is an education company where you will find free education for trading futures, forex, CFDs, as well as Nadex. Come visit the Apex forum with over 17,000 members.
