How To Straddle The Market For A Possible Big Mover

There are some scheduled news events that can really move the markets and some that will barely cause the market to notice; hence, the market won’t move much or pull back.

In fact, the market could act as if the event never happened. When it comes to a country’s bank, like the Bank of Canada releasing the Rate Statement and the Overnight Rate or interest rates for major financial institutions borrowing and lending money, that kind of news tends to move markets.

Pick The Right Strategy For The Expected Move

The release of the news will be at 10:00 AM ET, Wednesday, September 9, 2015, so you want to enter at 9:00 AM ET for Nadex USD/CAD Spreads expiring at 11:00 AM ET. It’s important to have a strategy that can accommodate an expected move.

With news events, it is extremely difficult to know what the news is going to be, whether it be positive or negative, good for currency or good for the market or not. Therefore, a strategy that can profit regardless of direction can be important as well.

Trading Nadex Spreads using a Straddle strategy can work well when a big move could happen and you don’t know which way the market is expected to go. Just like it sounds, a Straddle strategy straddles the market. You enter into two Nadex USD/CAD Spreads, one spread on each side of the market.

The lower spread for a Straddle strategy is sold with the ceiling being where the market is trading at the time. The upper spread for a Straddle strategy is bought with the floor being where the market is trading at the time.

Based on market analysis from past reports, it was found that you want to go for $40.00 or more in profit potential. In order to do this, you need to know your break-even points and profit points for your trade.

Know Your Numbers, With A Straddle Strategy One Side Can Win While The Other Loses

With a Straddle, when one of your spreads profits, the other will lose. For example, say your bought spread profits, then your sold lower spread will lose. Therefore, the market will need to move far enough in one direction to both cover the cost of your spreads as well as bring you profit.

As long as the market moves far enough in one direction, it doesn’t matter which direction, you can profit. For this trade, depending on your exact entries, the market will need to move approximately 80 pips in one direction to cover the cost of both sides of your straddle and bring you $40 profit.

If the market moved 40 pips in one direction, then that would be your breakeven point, again depending on your exact entries.

For more scheduled news events and strategies to trade them, go to www.apexinvesting.com.

Nadex can be traded from 49 different countries and is a regulated, US based exchange.