Implied Volatility Can Make For Good News Trade Setups

There are numerous reports that come out monthly that give indication to the state of the economy in countries around the world. Many of them can be good opportunities for strategically planned trades. Two such reports that come out simultaneously for the US, are US Core Durable Goods Orders and Durable Goods Orders. Basically, they are the measure of change in value of new purchase orders for durable goods placed with manufacturers. Durable goods include anything durable, something you can kick around and will take a beating. Really, durable means anything that will last three years or more e.g., cars, computers, appliances, and airplanes. For the Core Durable Goods report, transportation items are eliminated from the equation due to their volatility, possibly distorting the numbers.

Opportune Pricing

Very often, these kinds of reports can cause a market to react and move, more than on average without news, but also not dramatically big moves either. Then, after the move, the market tends to pull back. Sometimes the market may not move at all or only slightly. However, with the tendency for the reaction move, options can have some implied volatility built into the pricing making for good trade opportunities.

It is still not known which way the market will go. Therefore, a strategy that works for either direction is needed and an Iron Condor is just such a strategy. For the setup, you enter two different spreads using Nadex EUR/USD spreads. Since the reports come out Thursday, September 24, 2015, at 8:30 AM ET, you enter at 8:00 AM ET for 10:00 AM ET closing or expirations, with a combined profit potential of $30 or more for both spreads.

The benefit of trading Nadex spreads is that they have defined capped risk having a floor and a ceiling. Depending on if you buy and go long on the spread or sell and go short on the spread, you can't profit or lose past the floor or ceiling. For the Iron Condor setup, you will buy a spread below the market, but with the ceiling at or very close to where the market is trading at the time. You will also sell a spread above the market but with its floor at or very close to where the market is trading at the time.

To find your spreads you can use the spread scanner. See an example of the EUR/USD in the image of the spread scanner below. The spread contracts are in the center and you will notice on the far left and right, you can see if you sell or buy the spread what your potential loss or profit would be.

Once the market makes a move, as mentioned above, often it will pull back. Your max profit is when the market pulls back to center where it started right between the two spreads. Even if it does not pull all the way back, you can still make a profit. To calculate it, you would take your total profit potential on your trade and for every tick away from the center of your Iron Condor the market was, it would be less $1 in profit.

To understand more about Iron Condors or other strategies, or more on how to trade Nadex spreads and binaries visit www.apexinvesting.com.