Take a Position on Non-Farms
The US non-farm payrolls release is regarded as one of the best measures of job creation in the US, and is a very significant indicator on the economic calendar. You can take a position on the monthly non-farms data with a Binary contract from IG Markets.
US non-farm payrolls are released on the first Friday of every month at 1.30pm (London time), and the first few minutes after this data is released usually see a flurry of trading activity at IG Markets. We often handle over 10,000 transactions during this period, highlighting the importance of this announcement to the financial community.
Why are non-farms so significant?
The jobs market is central to the recovery in the US economy, with unemployment levels playing a leading role in its perceived strength. Consequently, the Federal Reserve will take non-farms figures into account in their policies, and rate-change decisions in particular:
- If the number of jobs created is high, this can indicate rising inflationary pressure, possibly convincing the Fed to consider increasing the bank rate.
- A fall in the number of jobs created may point to a contraction in the economy, raising the chance of a rates cut.
- Up or down, if the figure is significantly different from analysts' forecasts, there is a high probability of increased volatility in stock index levels and dollar exchange rates.
How to take a position on non-farms
At IG Markets we quote our payroll prices as a sequence of Binary contracts. The price of a Binary contract can only settle at either 0 or 100, meaning your maximum potential profit or loss can be calculated in advance.
Our non-farm Binary contracts are quoted in a 'ladder' format:
| Market | Sell Price | Buy Price |
|---|---|---|
| Non-farm payrolls to be above 290,000 | 5.0 | 15.0 |
| Non-farm payrolls to be above 240,000 | 20.0 | 30.0 |
| Non-farm payrolls to be above 190,000 | 43.0 | 53.0 |
| Non-farm payrolls to be above 140,000 | 67.0 | 77.0 |
| Non-farm payrolls to be above 90,000 | 83.0 | 93.0 |
In this example, the consensus is that the payroll figure will be just above 190,000, or close to the '50' price.
If you think that the analysts' predictions are incorrect this time, and in fact there will only be around 100,000 new jobs created, you could 'sell' the 'Non-farm payrolls to be above 140,000' Binary contract at 67.0. If you are correct, and the payrolls figure is around the 100,000 mark, then the Binary contract will settle at 0 and you will have gained 67 points. Your profit will be your initial stake multiplied by 67.
Conversely, however, had you been mistaken and the payrolls figure came in at above 140,000, then the contract would have settled at 100 and you would have lost your initial stake multiplied by 33 (100-67).
Take a position
At IG Markets, we provide a range of Binary contracts on economic indicators, including contracts on US initial jobless claims, the Bank of England's MPC interest rate changes and, of course, US non-farm payrolls. To find these offerings, simply log in to our online trading platform, go to 'Finder', select 'Binary Specials', and then 'Economic Data'.
If you do not have an IG Markets account yet, you can apply for an account now, with no forms to send and no obligation to fund.
Updated: 31/05/11
The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
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