UNPREDICTABLE MARKET MOVEMENT

While conducting a technical and fundamental analysis is key to predicting market movement, sometimes their are unexpected events that you must respond to quickly in order to minimize your risk and make a profit on your investment.

For example, a trader has done his or her research and knows that an unexpected economic event is going to happen at 12 PM on Monday morning, the United States Employment Agency is going to report the unemployment statistics for the past quarter. The trader knows that the retail market will be effected, but has no idea in which direction the market will move.

In order to cover both possibilities, the trader invests $1,000 on a Call option and $1,000 on a Put option at the same time. During this hour, the unemployment statistics are announced and unemployment has gone down 3% sending the price of retail options up.

Now that the trader has seen these statistics, they know that their Call option is going to be in-the-money and their Put option is going to be out-of-the-money. In order to minimize their risk, they use the Close Now feature and are able to recover $250 of the initial $1,000 they invested on the “Put” option. Since the “Call” option is in the money, the trader will get a return of $1,800 and have broken even with their investments.

Warning : If there after closing the “Put”, the Gold decreased and went below the strike price, the Close Now option would only giv e the trader $150 back from their out-of-the-money trade.

Making Profit from an Unpredictable Market

While this might not sound like the high profit strategy that you were looking for, you can trade Range Options, which give traders increased flexibility in volatile, unpredictable markets.

For example, if a trader decided to use Range Options and they think that the US employment statistics will have a huge effect on the market, and the price of EUR/USD is going to change greatly when the statistics are announced, they could buy an “Out” option.