A brand-new trading year comes with a fresh batch of catalysts may to benefit from, but of course this comes with their corresponding risks. Fortunately for easyMarkets clients, there are a couple of features that may allow traders to take advantage of potential volatility while keeping their exposure in check.
The volatility index or VXX tracks the magnitude of the price movements of the S&P 500. In particular, it measures expectations for the US stock index over the next 30 days and is dubbed as the ‘fear index.’ This is calculated by the Chicago Board Options Exchange or CBOE and is used as an underlying component for futures and options.
Since the VXX reflects the perceived volatility in the S&P 500 index, its movements may hinge on how much the actual figures surpass or undercut expectations. The VXX CFD allows traders to bet on the direction of stock markets and can also be used to hedge existing positions.
On the easyMarkets platform, clients are able to trade these market fluctuations by trading volatility as an asset or CFD. A higher VXX reading means that fluctuations were larger or more volatile while a lower reading means that these movements were smaller. With that, top-tier market catalysts may be followed by a spike in volatility, which may be caught with a long VXX position, and the aftermath is often accompanied by lower volatility.
Another useful feature is dealCancellation, which allows clients to cancel or back out of a losing trade within an hour after opening the position and have their original investment refunded instead of taking in the actual paper losses. After all, trading high-profile events may be pretty daunting and risky so it helps to have some form of “insurance” that losses will be limited in the event of large spikes against your trade for 60 minutes.
With this feature, a trader may be less anxious about opening trades, managing open positions, or taking on larger bets. For a small fee based on market volatility, one can decide to cancel the trade and have his original investment refunded instead of taking the full loss.
This feature also comes in handy for trading top-tier market events that may come with a lot of volatility. In these cases, markets typically move in one direction continuously so a trader that is caught in a losing position may see those losses magnified by the second until he decides to exit or his stop gets hit.
With that said, here are the main events during which you might want to trade the VXX or apply dealCancellation to your positions:
It’s no secret that this year may be filled with political headlines, what with Donald Trump officially starting his term as US President and other presidential elections set to take place in the euro zone’s top economies. These changes may have far-reaching implications on global trade and business performance so financial markets may have strong reactions to related updates. Apart from that, OPEC decisions on crude oil production may have a major impact on global commodity prices as well.
US President Trump’s Inauguration: January 20
French Elections: April 23, May 7
German Elections: Between August 27 to October 22
OPEC Meetings: April 22, June 1, September 28, November 30
Central Bank Decisions
Interest rates often determine the demand for a particular currency so actual and potential monetary policy changes have a big say in currency price action. Traders may typically price in their expectations ahead of time but any surprises during the actual event may still spur huge spikes on the charts.
FOMC Statement: February 1, March 15, May 3, June 14, July 26, September 20, November 1, December 13
FOMC Meeting Minutes: January 4, February 22, April 5, May 24, July 5, August 16, October 11, November 22
ECB Interest Rate Decision: January 19, March 9, June 8, July 20, September 7, October 26, December 14
BOJ Interest Rate Decision: January 31, March 16, April 27, June 16, July 20, September 21, October 31, December 21
BOE Interest Rate Decision: February 2, March 16, April 27, May 11, June 15, August 3, September 14, November 2, December 14
RBA Interest Rate Decision: February 7, March 7, April 4, May 2, June 6, July 4, August 1, September 5, October 3, November 7, December 5
RBNZ Interest Rate Decision: February 8, March 22, May 10, June 21, August 9, September 27, November 8
SNB Interest Rate Decision: March 16, June 15, September 14, December 14
Employment reports are often considered leading indicators of spending and growth, so it’s no surprise that these releases may tend to generate significant price fluctuations as well. In particular, the US non-farm payrolls release may determine whether the Fed can stick to its plan of hiking rates thrice this year or not while New Zealand’s jobs report may elicits a big reaction since it’s released on a quarterly basis.
US Non-Farm Payrolls Release: January 6, February 3, March 10, April 7, May 5, June 2, July 7, August 4, September 1, October 6, November 3, December 8
New Zealand Quarterly Jobs Report: January 31, May 2, September 13, October 31
Last but most definitely not least are the GDP readings, which measure how an economy performed for the recent quarter. As such, these help market participants figure out if central banks are about to make any adjustments in monetary policy in order to stimulate growth or to cool the economy down.
Chinese Quarterly GDP Release: January 17, April 13, July 13, October 18
UK Preliminary GDP Release: January 26, July 26, October 25
US Advanced GDP Release: January 27, April 28, July 28, October 27
Australia Quarterly GDP: March 1, May 31, September 6, December 6
New Zealand GDP: June 14, December 13
As always, these reports may tend to be major market-movers so they do come with a higher than usual amount of risk.
Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).