By Darrell Martin
The prospect of building a new home is both exciting and terrifying. Besides being one of the biggest purchases a person makes, there are always decisions to be made about location, style and even color. All factor into the US New Home Sales News Release since they extend to other services such as mortgage brokers, landscaping and furnishings. Along with the month-over-month New Home Sales report, these reports will be released on Thursday, January 25, at 10:00 AM EST.
Since New Home Sales measures the change in the percentage of the new home sales, it can be a good indicator of the economy. For example, if the number is strong or increasing, that shows an increase in the amount of houses being built, thus an indication of a stronger economy.
The number for both reports is forecast to be lower than last month. However, this does not convey that it cannot be traded. This type of report usually causes the market to move and then pull back, but the direction is unknown. Therefore, a strategy such as an Iron Condor utilizing Nadex EUR/USD spreads can be considered.
This strategy is capped risk when using CFTC regulated Nadex spreads. One spread is bought, with its ceiling being where the market is trading at the time. One spread is sold, with its floor being where the market is trading at the time. Each spread for this trade, should have a profit potential of $15 or more for a combined profit potential of $30. This is based on previous market reaction to the past 12 - 24 releases of this news. If $15 profit potential is not attainable for one of the spreads, then there is no trade. Be sure not to force trades.
This strategy is one that profits on a market pullback or a ranging market. One spread will have been bought below market and the other above market. Therefore, both spreads can profit with the market returning to center between the spreads close to or at settlement. The break-even points for this trade are 30 pips above and below where the market was at entry, giving the trader a 60-pip range possibility of making some amount of profit.
Stops should be placed at the 1:1 risk reward ratio points, which are 60 pips above and below from where the market was at entry. Entry can be at 9:00 AM ET for this trade, looking for 11:00 AM ET expiring spreads.