Numerous Canadian Reports Coming Out On Friday: Here's What To Know
Four reports are coming out regarding retail spending and inflation in Canada the end of this week. Both topics affect the economy. The reports being released at 8:30 a.m. EDT, Friday, include the Core CPI, Core Retail Sales, CPI and Retail Sales, all are released by Statistics Canada.
The Core CPI is the change in price of goods and services bought by consumers but excluding the eight most volatile items. Core Retail is the change in value of sales at a retail level; although, it excludes automobiles due their volatility in sales. CPI is the change in price of goods and services bought by consumers, and this accounts for a larger part of the overall inflation. Retail Sales is the change in total value of sales at the retail level, and this is the main measure of consumer spending which accounts for the most part of the economy.
Market's Average Move Is 35 Pips Then Pulls Back
These significant reports tend to move the USD/CAD market an average of 35 pips and then retrace. A neutral strategy like an Iron Condor works well to capture profit in these scenarios. To set this up you can use Nadex Spreads. You would buy the lower spread with the ceiling where the current underlying market is trading and you would sell the upper spread with the floor where the current underlying market is trading. Apex Investing tracks the markets after trading events and found the average move for this event being 35 pips, therefore you want your Iron Condor to have a profit potential of $35 or more.
You can always add more spreads to each side of the Iron Condor as long as you keep the same amount of spreads on each side. Using Nadex USD/CAD Spreads enter at 8:00 a.m. EDT for a 10:00 a.m. EDT expiration. It is easy to open an account at Nadex, and they are open to 49 countries for trading. Their commissions are low at .90 a contract maxing out at 10 contracts.
The Closer The Market Is To The Center Of The Iron Condor At Expiration The More Profit
With an Iron Condor you have a large span for break-even distance and for a 1:1 max risk reward ratio. Leave your trade on until expiration giving it time to make its move and pull back close to center between your spreads. If it pulls back to in between your spreads, the closer it is to center the more profit you will make with the max profit being right in the middle between them.
Looking At Different Scenarios:
If you bought your lower spread for $15 and sold your upper spread for $20 and the market moved up 20 pips, however, it did not pull back as expected, then you would profit on your lower bought spread $15 and you would lose on your sold upper spread $20 for a net loss of $5. If the market moved down 15 pips and did not retrace before expiration, then you would profit $20 on your sold upper spread and lose on your bought lower spread $15 for a net profit of $5. The market could move approximately 35 pips either up or down and not retrace, and at expiration you would be break even. The market could move 70 pips either up or down for a 1:1 max risk reward ratio.
Remember you want a profit potential of $35 or more. If that's not possible from the spreads offered at the time of entry, then no trade.
To learn more about how to trade the news and for a complete calendar with strategies, go to www.apexinvesting.com.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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