A Different Way To Play Construction PMI Numbers
Markit, a leading global provider of financial information services, released Construction Purchasing Manager’s Index (PMI) for the UK at 4:30 AM ET, Tuesday, February 2, 2016. The number is released monthly and there is a recommended trade strategy to trade it based on analysis of the last 12 - 24 reports and market reaction.
This report is a leading indicator for economic health due to businesses’ purchasing managers reacting quickly to changes in market conditions. The Construction PMI number is based on the survey results of approximately 170 purchasing managers who were asked relevant business questions about their purchasing, employment, pricing, delivery and inventory activities. One idea that could have been used is to trade calls for an Iron Condor using Nadex spreads.
To set up the strategy, you can enter two spreads as early as 11:00 PM ET the evening before, for 7:00 AM ET expirations.
The market tends to move and pull back or range for this news release. That makes an Iron Condor strategy a perfect setup.
With this trade strategy, the market can move 35 pips up or down and your trade is break even. You want the market to move and pull back, so one side of your trade will profit and the other will profit with the pull back, or at expiration.
Otherwise, you want the market to range and stay where it is, so the spreads expire with the market as close to the center of your spreads as possible. Both of these scenarios offer the highest profit outcome. The 1:1 risk ratio points would be if the market moved 70 pips up or down, which can be unlikely based on previous market analysis.
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