How To Trade US GDP News With Defined Capped Risk

As the week winds out from last week’s market volatility from the Brexit, the regularly scheduled news events can once again be traded. On Tuesday at 8:30 a.m. ET, the U.S. Final Gross Domestic Product (GDP) and Final GDP Price Index will be released. Typically, this news event can make trading an Iron Condor strategy a high probability trade.

This strategy calls for two spreads using Nadex EUR/USD spreads, entering as early as 8:00 a.m. ET for 10:00 a.m. ET expirations. The spread has a floor and a ceiling that denotes the range of the market that is traded long or short.

Here, one could buy a spread below the market with the ceiling of the spread where the market is trading at the time. The profit potential for this spread should be $17 or more. Then, they could sell a spread above the market with the floor meeting the ceiling of the bought spread and also where the market is trading at the time. This spread should also have a profit potential of $17 or more.

The EUR/USD tends to make a move and then pull back in reaction to this scheduled news event. That kind of move is ideal when trading the Iron Condor strategy. Maximum profit can be made when the market pulls back as close as possible to the center between the spreads, and remains there at settlement. For stops with a combined profit potential of $35 or more combined between the spreads, place limit take profit orders 70 pips above and below for a 1:1 risk/reward ratio points.

This trade setup is called a premium collection trade. As time expires, premium is collected until time runs out. The advantage to trading spreads is defined capped risk--the total risk is known up front and is capped at the floor and ceiling.