Data report Straddle

Discussion in 'Data Sets and Feeds' started by pcp198, Oct 1, 2010.

  1. pcp198


    It seems like the perfect risk free trade, have equal position size long and short right before the data is released, the market is almost always spikes significantly in one direction. Example; use 1 pt stop in each direction and 3 point target, even with 1 point slippage you'd still net 1 pt profit. what am I missing?
  2. spindr0


    "What am I missing?"

    Net delta of straddle is low
    IV collapse after data release
    B/A slippage
    4 commissions

    A 3 pt move could result in a loss
  3. pcp198


    not sure what you mean by IV collapse.

    The most frequent data report is $UNG (every thursday at 10:30 ET).
  4. spindr0


    Perhaps I misinterpreted your post.

    What kind of straddle are you talking about?
  5. He probably means bracketing around data releases with stop limits to enter long/short the underlying, not the options straddle we're thinking. Will work sometimes not all the time; if anything, the targets/stops should be a function of volatility. Higher vola times, your entry will be triggered, then the 1 pt stop will just be cut like water before moving 10 pts in your direction.

    Sim trade it on NFP next Friday.
  6. spindr0


    That's what I surmised after he asked me what IV collapse was :)
  7. pcp198


    This is for ETF's or Futures, I dont trade Options.

  8. drm7


    I was curious about the same thing, and discovered a few problems:

    1. That nice solid bar going straight up/down actually has a lot of gaps in it. I took a snapshot of the tick data on Russel 2K futures on a jobs report. First tick after the announcement was 4 POINTS lower, even though there were no gaps in the 1 minute bar.

    2. The brackets get swept a lot in the 30 secs prior to the report -often in the opposite direction of the break.

    I think that there is a lot of opportunity to trade the news, but (like anything involving trading) it's not easy.

    There are a lot of algo traders who code news reading software into co-located servers, then buy/sell based on the headline number vs. expectations. They will be first in line (and even they will get horrible fills.)

    I'm interested to see what other traders think, though. My experience is limited to simulations and looking at the data.
  9. Apparently, this is relatively simple to do at a retail level, too.

    See for algo news trading with Ninjatrader ...