This Week's UK Report Batch Was An Opportunity To Straddle The Market

A variety of news reports came out for the UK in the early morning at 4:30 AM ET, Wednesday, January 20, 2016. They affected the GBP/USD market, but who wants to trade at that hour? There is a strategy to trade using Nadex GBP/USD spreads.

The reports include Average Earnings Index, Claimant Count Change and the Unemployment Rate. These reports can really move the market.

Fortunately, the strategy is meant for capturing profit whether the market moves up or down. It actually straddles the market with a spread on both sides of the market. A spread has a floor and a ceiling, which you can’t win or lose past. Therefore, the risk is capped and defined up front.

To set up this trade, one could have bought a spread above the market but with the floor where the market is trading at the time, and sell a spread below the market but with the ceiling where the market is trading at the time. 

Typically, for news events where a straddle is recommended, the market tends to make a significant move in one direction. When that happens, one side of your straddle will profit while the other one loses.