Trade Opportunity On Europe's Industrial Production
The Euro Industrial Production, which is released around 45 days after the end of each month, comes out Wednesday at 5:00 a.m. ET. This is an event that can be traded the night before, at about 11:00 p.m. ET, Tuesday for 7:00 a.m. ET expirations, using Nadex EUR/USD spreads.
Nadex spreads are day trader options, two hour, five hour, eight hour, daily and weekly spreads listed. Nadex is a U.S. based CFTC regulated exchange. Besides spreads, Nadex also lists binaries for trade. Unlike some of the less scrupulous overseas companies offering binaries, the trader can exit Nadex binaries and spreads at any time.
For this trade opportunity, based on previous market reaction to this news event, an Iron Condor strategy with two spreads could be used. The trader would buy a spread below the market, with a ceiling of where the market is trading at the time. They could also sell a spread above the market with the floor of where the market is trading at the time. This way, the ceiling of the lower spread meets the floor of the upper spread and they are right at, or very close, to where the market is trading.
When finding the above spreads for an Iron Condor, it’s important to know what the max profit potential will be for the strategy. This should be based on an average of previous market movements in reaction to the scheduled news event. For this opportunity, each spread should have around $17 or more profit potential for a combined profit potential of $35 or more.
An easy way to determine where to put 1:1 stops with an Iron Condor strategy is to add the profit potential for each spread and then double it. For example, if each spread for this trade has an $18 profit potential, then 18 plus 18 equals 36, double 36 and the total is 72. Stops should be placed 72 pips up and down for 1:1 risk/reward ratios. The breakeven points are 36 pips up or down. If the market settles anywhere between the breakeven points, then the trade makes some amount of profit, with max profit being if it settles right between the center of the spreads.
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