News Provides Volatility For Trading Opportunity

There are different kinds of reports released on a monthly schedule that can be traded. Expectation of volatility or Implied Volatility can inflate leading up to these news events affecting option pricing, which can provide trade opportunities. Friday at 9:15 a.m. ET the U.S. Capacity Utilization Rate and Industrial Production numbers will be reported. The first gives a percentage of available resources utilized by manufacturers, mines and utilities and is a leading indicator for inflation. The second measures the change in total inflation-adjusted output produced, making it a leading indicator for production and economic health.

Implied volatility tends to increase leading up to the announcements. Once the news is out however and information is known, it tends to drop sharply. This kind of market scenario makes for great Iron Condor trades using Nadex spreads with capped risk.

For this trade opportunity, one could buy a EUR/USD spread below the market with the ceiling of where the market is trading at the time. Also, one could sell a EUR/USD spread above the market with the floor being where the market is trading at the time. Enter at 8:00 a.m. ET for 10:00 a.m. expirations. Learning to trade spreads and finding the right spreads for a strategy can be done easily using the spread scanner designed specifically for trading Nadex. Both spreads should have a profit potential of $15 or more for an approximate $30 or more profit potential. 

With the expectation of a move and pullback in the market due to the implied volatility, the Iron Condor strategy of buying below the market and selling above it can work well. The trade makes maximum profit when the market returns to center between the spreads. Stops should be placed in case the market takes off far enough and does not really return. The 1:1 risk/reward ratio points are approximately 60 pips above and below, depending on your exact entries and exact profit potentials.