Using A Straddle For A Low-Risk Overnight GBP/USD Trade


By Darrell Martin

Looking for a low-risk overnight trade? When news is released in a different time zone than you reside in, it can move the market while you sleep. To trade this news with low risk, a straddle is a good strategy to implement.

A straddle is the opposite of an iron condor. To set it up, buy a spread with the floor being where the market is trading a the time. At the same time, sell a spread with the ceiling being where the market is trading at the time.

An overnight news trading opportunity presents itself on Sunday, February 4, 2019. The Services Purchasing Managers Index (PMI) report for the UK will be released by Markit on Monday, February 5, 2019 at 4:30 AM ET. This report is a leading indicator for economic health and tends to move the market, specifically the GBP/USD. The straddle strategy is prepared to catch profit in both directions, since it literally straddles the market.

For this news report, enter as early as 11:00PM, February 4 for 7:00 AM February 5 expiration. Using Nadex GBP/USD spreads, risk $40 or less and shoot for a profit of $40. To maintain this low risk trade, each spread should have a maximum risk of $20 or less. With such low risk, the advantage of this trade is not having to place stop orders.

Place a take profit order where the market would hit 80 pips above or below entry. At those points, profit will cover the cost of the winning spread and the loss on one side as well as allow for a $40 profit.

Use the scanner to easily find the right spreads for the trade. All information for a Nadex spread is available in one window. For straddle strategies, first find spreads with the correct risk amounts. Then, confirm that the ceiling and floor parameters meet. Never force a trade if the parameters do not line up. Demo trade all new strategies to mastery before trading live.

For other news trading opportunities, visit the news trading plan calendar at Apex Investing.