Trading Opportunity: Canadian Building Permits


By Darrell Martin

Building a new house is exciting and daunting all at the same time. Think of the many choices that go into a new house, all of which affect the economy.

One of the first things that must be obtained is a building permit. Many countries keep track of these numbers allowing for a regular release of a report indicating the demand in the housing market. This presents a trading opportunity when the report is released.

Canada will release its Building Permits News report on Wednesday, May 9, at 8:30 AM ET. This causes movement in the market, but the direction of the movement is unknown. Hence, an Iron Condor is a choice strategy for this situation. This strategy includes two spreads, one bought spread trading the bottom range of the market, and one sold spread trading the range directly above the bought spread. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time.

The market tends to move and then pull back in response to the news event. For this kind of movement and strategy, trading Nadex USD/CAD spreads presents a high probability trade. Risk is capped at the floor and the ceiling of the spreads but risk can be further managed with stops.

In this trade, also consider the level of implied volatility. If it is high in the market, then there will be more profit potential available in the spreads. Likewise, if volatility is low, there may be very little profit potential. In that case, there would be no trade.

The key to profiting in an Iron Condor spread is for the market to settle somewhere within the desired range from where it started. For example, if a trader had a profit potential of $30 for this trade, as long as the market settles somewhere within the 60 pip range of 30 pips above and below from where the trade was entered, the trade will profit.

With time expired and the market settled between the two spreads, max profit is realized. This trade can be entered as early as 8:00 AM ET with an expiration of 10:00 AM ET. The minimum profit is $30.

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