By Darrell Martin
US Existing Home Sales were down 0.18M for July sales, from 5.57M to 5.39M, last reported on August 24. Thursday, September 22, at 10:00 AM ET, the release is forecast to be 5.45M. The sale of a home has a far-reaching effect on the economy. When a home is bought, often renovations are done: a loan is bought and sold, and furniture is purchased; all of these activities stimulate the economy. For this reason, it is a leading indicator for economic health and can have a high impact on the market, making it a good news event for trading.
After this news is announced, the tendency for the market is to react quickly, make a move and then pull back. An Iron Condor strategy using Nadex EUR/USD spreads, kind of sandwiches the market with its two-spread setup when the market pulls back. One spread is bought below the market and one spread is sold above the market. The ceiling of the bought spread should meet the floor of the sold spread and be where the market is trading at the time. When the market pulls back and settles right between the two spreads, then full profit is made. When the market settles somewhere between the two breakeven points, some profit is made as well.
For this news event, the profit potential for the combined spreads should be $30 or more. Split between the two spreads makes it around $15 a spread. The breakeven points for the Iron Condor are its total profit potential in pips; for this trade that would be 30 pips up and down from where the market was at entry. Stops can be set as well at double the profit potential. Where the market would hit 60 pips above and 60 pips below, stops should be placed to keep the risk realistic at a 1:1 risk/reward ratio.
Traders using the spread scanner are able to use filters to quickly find the right spreads for their trade, then narrow down further by using the risk/reward columns of the scanner for each spread buying or selling. This makes execution quick and accurate. The trader can find spreads quickly by looking for the right reward potential. Then, verify the ceiling/floor parameters.
This news event is released monthly and can offer a nice scheduled trade.
For free access to the spread scanner and a full calendar of news events to trade, visit www.apexinvesting.com.
