Scheduled News Events Create Implied Volatility For Trade Setups

The fortunate thing about scheduled news events is the implied volatility that is often built into the prices in the market. For example, Thursday, May 28, 2015 at 10:00 AM ET, US Pending Home Sales numbers are released. In anticipation of this news coming out, Nadex Spread prices could build up making for a great trade opportunity. To trade this event, it is recommended by Apex Investing to trade Nadex Spreads and set up an Iron Condor strategy.

For an Iron Condor strategy two spreads are traded, a lower spread is bought and an upper spread is sold. This strategy is perfect for when markets are anticipated to move, but the direction is unknown and expectation is for the market to pull back, possibly returning to where it started from, before the news was released. That is how the EUR/USD has frequently reacted after US Pending Home Sales numbers are released, based on analysis of this market’s reaction over 12-24 months of releases. Therefore, using Nadex Spreads, buy a lower EUR/USD Nadex Spread with the ceiling where the then current underlying EUR/USD is trading, and sell an upper EUR/USD Nadex Spread with the floor where the then current underlying EUR/USD is trading.

Profit Potential For This Iron Condor Using Nadex Spreads

This setup can be entered as early as 9:00 AM ET with an 11:00 AM ET expiration. You want your trade to have a profit potential of $25 or more. To achieve this, buy the lower spread for around $12 and sell the upper spread for around $12, so the profit potential makes up around $24 or more. If there isn’t enough implied volatility in the pricing, this won’t be possible and don’t take the trade. If you aren’t able to find the right spreads, with the ceiling and floor where the then current underlying market is trading, then don’t take the trade.

After the news is released the market will most likely react and then pull back. The closer it comes back to the center of your Iron Condor, between the spreads, the closer it will be to max profit. For this trade, you can leave it on until expiration to let the trade have max time to play out.

Can Move 50 Pips For 1:1 Ratio, Or 25 Pips For Break Even

The EUR/USD can move 50 pips in one direction and it will still be a max 1:1 risk reward ratio. If it moves approximately 12 pips up and remained there until expiration, the trade would profit approximately $12 on the lower bought spread and it would break even on the sold upper spread. If the market moves approximately 25 pips up, then the trade would profit approximately $12 on the bought lower spread and lose approximately $12 on the upper sold spread, therefore breaking even. Of course, those profit and loss numbers would depend on the bought and sold price of the spreads.

To find out more about how to trade the news, how to trade Nadex available now from 49 different countries, and different strategies to trade go to www.apexinvesting.com