Take positions on economic numbers
Before economic reports like the weekly jobless claims come out, the media coverage is full of predictions about how the market is likely to react. The challenge for traders, however, is that the market’s reactions are not consistent: good news doesn’t always cause a rally, and bad news sometimes gets just a shrug and a yawn.
Nadex binary options on economic events let you trade the event itself, without predicting the market reaction. If you think unemployment is going down, you can turn that opinion into a trade. If you think the Fed is going to raise interest rates, you can trade a yes/no question: will the Fed Funds rate be above, at, or below this number after the announcement?
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Fed Funds Rate
The Fed is in the news, but can you trade it?
The Fed funds rate is the U.S. overnight interbank lending rate. It affects the interest rates for everything from mortgages to student loans. The Federal Open Market Committee, part of the Federal Reserve, meets eight times a year to decide whether to change the rate.
Fed monetary policy has two mandates: help increase employment and control inflation. In December 2015, the Fed raised rates for the first time since 2009, citing improved employment and confidence that inflation would rise to its 2% objective. If you’re reading about these economic issues and forming opinions about what the Fed might do, you can turn that opinion into a limited risk trade.
Last target Fed Funds Rate:
Between 0.5% and 0.75%
The target rate was between 0% and 0.25% from January 2009 to December 2015, when the FOMC increased the rate. The Fed raised the rate again in December, 2016.
Next FOMC meeting ends:
Wednesday, February 1, 2017
Binary options on the federal funds rate open at 3am ET on the first business day of the week prior to the next FOMC meeting.
Weekly Jobless Claims
Unemployment is down, but will it stay down?
After hitting a high of 9.9% in mid-2010, US unemployment dropped to a low of 4.6% in November 2016, the lowest rate since 2007. Where will it go next? Economists weigh multiple factors and have multiple theories on what is good and bad for job creation.
You probably do, too. So why not turn your ideas into trades? The Jobless Claims report is issued weekly in the U.S., detailing the total number of Americans filing for unemployment benefits. Nadex offers a limited-risk, weekly binary option on the jobless claims number released on Thursdays by the US Department of Labor.
Week ending January 7, 2017:
Initial claims: 247,000
This number is an increase of 10,000 from the previous week's revised figure of 237,000. The four-week average was 256,500.
Next jobless claims report:
Thursday, January 19, 2017
Binary options on jobless claims open at 3am (ET) on the first business day of the week leading up to the release.
Record job creation streak, but will it continue?
As of December 2016 the US economy has had 75 consecutive months of job growth, the longest streak of job creation since 1939. Different people have different opinions about what caused it or how long it will continue.
The Nonfarm Payroll is part of the Bureau of Labor Statistics monthly Employment Situation report. It shows the number of jobs added or lost in the U.S. economy in the last month, excluding jobs in the farming industry.
As with other events, economic and otherwise, the market reaction can be hard to predict. With Nadex binary options, you can trade the number itself, with limited risk.
Change from October to November:
Next Nonfarm Payrolls:
Friday, February 3, 2016
Binary options on Nonfarm Payrolls open at 3am (ET) on the first business day of the week leading up to the release.
Trade the event, not the reaction
Tune into the financial news just ahead of an economic report and you’ll hear a lot of “the markets should” and “stocks are likely to.” You’ll hear pundits offering their opinions or quoting surveys of economists or analysts to predict the market’s reaction.
Traders may be more practical, but traditionally, they still have to trade the reaction. For example, an old floor trader’s rule says to “fade” (short sell) the first rally after the end of the Federal Open Market Committee meeting. The market often rallies in the first minutes after the Fed announces its interest rate decision, but then sells off as traders take quick profits and short-sellers capitalize on the higher prices. By the end of the day, the market may have moved a lot, only to end up close to unchanged.
Some traders enjoy trying to predict the market’s reaction and some are even profitable doing it. But if you want to express your opinion on the economic event itself, Nadex economic event binaries let you do that. And the same limited-risk, low collateral innovations of binary options apply.