FOMC Member Speaks = Binary And Spreads Trading Time

The Federal Open Market Committee (FOMC) is a committee made up of 12 members of different groups in the Federal Reserve System. Eight regular meetings are held per year but whenever an FOMC member speaks, it moves the market. This means plenty of opportunities for trading in both binary options and spreads.

On September 17, 2015, the FOMC, sometimes referred to as “the Fed,” had one of the eight regular scheduled meetings. Volatility can be expected and extreme caution on any trade should be exercised.

Since movement is known to happen, but the direction is unknown, an Iron Condor strategy is usually recommended. With this strategy, you sell a higher range spread and buy a lower range spread. The sold spread’s floor matches the bought spread’s ceiling. This strategy is useful in flat or range bound markets. Full profit on both sides is achieved when expiration price equals the matching bought and sold spreads’ common floor and ceiling. Sometimes one side will lose or as movement happens, you may choose to exit or “leg out” of half of your trade to protect your profits and cut your losses. At other times, one side will profit followed by the market pulling back and then the other side will profit. This is also a time when you could choose to “leg out” of your trade.

There were many trade opportunities because of the market’s movement. The following trade is a good example of what can happen when the FOMC makes an announcement. In a matter of three minutes, the price on YM futures and the indicative index on Nadex’s Wall St 30 had dropped from 16663.9 to 16576.0. This trader had already sold 21 contracts of 16700-17100 (4:15PM) spread at 16741 as part of an Iron Condor trade.

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This trader was able to grab a $668 profit!

June 17, 2015 was another FOMC announcement day. This proved to be profitable for a trader with fast fingers! Forty-three binary option trades were placed in three minutes. Another trader commented, “That kind of trading makes me dizzy.” This type of fast trading shows the amount of movement that can happen throughout the indices markets when the Fed makes their announcements. The trader walked away with “another couple thousand trading fast, post FOMC.”

Trading plans and strategies vary from trader to trader, but as long as you follow your plan you have a better chance of being profitable than if you have no plan or do not follow your rules. With the June 17, FOMC announcement, another trader followed his trading plan and posted his results. He had 14 trades, which included 13 wins and 1 loss for a net profit of $2,169.62, including fees. You can see from his notes that some were held until expiration, while some hit the take profit goals.

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Taking advantage of market moves is simplified when using Nadex binary options and spreads as the risks and rewards are known up front. With binaries, the settlement amount is all or nothing at expiration, but you are able to exit at any time prior to expiration to protect your profits or cut your losses. If you are correct on your assumption of the binary trade, you receive the payout of $100. If you are not correct, you get nothing.

With spreads, you cannot win or lose more than the floor or the ceiling of the respective spread contract you are trading. Each tick, up or down is worth $1.00, and you are able to exit at any time before expiration.

It is important to be aware of news and how it relates to moves within the markets you are trading. Being prepared can equal being profitable. A weekly news calendar is available along with free education and scanners to help you in trading at www.apexinvesting.com.