The Non-Farm Employment Change is typically released the first Friday of the month at 8:30 am New York time. For forex traders, it is one of the most volatile market reports of the month. However, with the July 4th holiday preceding the report, how much volatility can traders expect?
The table below shows the minimum, maximum, and historical average number of pips, measured from high to low from 8:30 am to 8:45 am New York time, that each currency has moved based on data points for the month of July during 2008 to 2017.
So how can traders combine this information with the limited risk opportunity that binary options provide? Since the Non-Farm Employment Change report provides potential volatility, Out-of-the-Money binary options are ideal for lowering risk and increasing profit potential. For example, the minimum move on the AUDUSD is eight pips. The binary option strike width is four pips (strike width is the difference between one strike to the next, measured in pips). Since the AUDUSD minimum move is eight pips, then the trader, preparing for the minimum move, would enter no more than two strikes away from where price is trading immediately prior to the report announcement. If the trader is anticipating an average move on the AUDUSD, then they could potentially use an Out-of-the-Money strike that is five strikes away from where price is trading immediately prior to the market report (average move divided by strike width).
All of the currencies listed in the table above have a four pip strike width, with the exception of the GBPUSD, which has a ten pip strike width. Additionally, it is advantageous for the trader to compare the risk on each of the currencies because sometimes they can get a better "deal" using the wider strike width currency. For example, while the AUDUSD strike may incur $35 of risk (going out two strikes), the GBPUSD may have a $20 risk going out only one strike.
Nadex binary options provide an excellent opportunity for traders to participate in these high volatility market reports with limited risk. You can even open a free demo by clicking here.