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FX Options 0907 Poster 1

The document discusses various strategies for trading currency options, including buying calls when bullish on the dollar, selling credit spreads when bearish on the dollar, buying puts when bearish on the dollar, selling iron condors when neutral on the dollar, buying straddles when expecting significant dollar movement, and buying butterflies when expecting narrow dollar movement.

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ajayvmehta
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80 views1 page

FX Options 0907 Poster 1

The document discusses various strategies for trading currency options, including buying calls when bullish on the dollar, selling credit spreads when bearish on the dollar, buying puts when bearish on the dollar, selling iron condors when neutral on the dollar, buying straddles when expecting significant dollar movement, and buying butterflies when expecting narrow dollar movement.

Uploaded by

ajayvmehta
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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w w w. f u t u re s m a g .

c o m

SPONSORED BY:

FX OPTIONS TRADING STRATEGIES


Bullish on the dollar
BUY A CALL
Bullish on the U.S. dollar/Bearish on the euro
Exchange Rate (EUI) EUI is currently trading at $77.82. You are bullish on the dollar and forecast the EUI to go as high up as $83.00.

Bearish on the dollar


SELL A CREDIT SPREAD
Bearish on the U.S. dollar/Bullish on the euro
Exchange Rate (EUI)

w w w. i s e . c o m

Buy the 90-Day $78 Call Net Debit Breakeven (B/E)* Maximum profit Maximum Loss

$1.15 $1.15 $79.15 Unlimited $1.15

EUI is currently trading at $77.82. You are expecting a drop in EUI and want to earn a premium, while hedging against future upside risk. Sell 90-Day $76 Call Buy 90-Day $80 Call Net Credit Breakeven (B/E)* Maximum Profit Maximum Loss $2.30 $0.40 $1.90 $77.90 $1.90 $2.10

BUY A DEBIT SPREAD

w w w. o p t i o n s x p re s s. c o m

EUI is currently trading at $77.82. You are expecting an increase in the EUI and hoping to reduce some of the price risk. Buy 90-Day $76 Call Sell 90-Day $80 Call Net Debit Breakeven (B/E)* Maximum Profit Maximum Loss $2.30 $0.40 $1.90 $77.90 $2.10 $1.90

Exchange Rate (EUI)

Bullish on the U.S. dollar/Bearish on the euro

BUY A PUT
Bearish on the U.S. dollar/Bullish on the euro
EUI is currently trading at $77.82. You are bearish on the dollar and forecast the EUI to go as low as $74.00. Buy the 90-Day $78 Put Net Debit Breakeven (B/E)* Maximum profit Maximum Loss $1.35 $1.35 $76.65 $76.65 $1.35

CURRENCY Euro British pound Japanese yen Canadian dollar

CONVENTION USD/EUR USD/GBP USD/JPY USD/CAD

SYMBOL
Exchange Rate (EUI) Exchange Rate (EUI)

EUI BPX YUK CDD

If You Expect The Dollar To Strengthen, You Buy Calls


Neutral on the dollar
SELL AN IRON CONDOR
Neutral on the dollar/Neutral on the euro
EUI is currently trading at $77.82. You are neutral as to the direction of movement for both the euro and the dollar. You are hoping to earn an income with pre-defined limit risk. Sell 90-Day $78 Call Buy 90-Day $79 Call Sell 90-Day $77 Put Buy 90-Day $76 Put Net Credit Upside Breakeven (B/E)* Downside Breakeven (B/E)* Maximum Profit Maximum Loss $0.45 $0.20 $0.55 $0.25 $0.55 $78.55 $76.45 $0.55 $0.45

Investors can access the underlying rates for FX Options from several leading market data vendors and financial websites, including Big Charts, Bloomberg, ILX, Reuters, and Yahoo! Finance.

USD/EUR Historical Rate (symbol: EUI)


78 77 76 75 74 73 12/1/2006 12/15/2006 12/29/2006 1/12/2007 1/26/2007 2/9/2007 2/23/2007 3/9/2007 3/23/2007 4/6/2007 4/20/2007 5/4/2007 5/18/2007 6/1/2007 6/15/2007 6/29/2007 7/13/2007 72

If You Expect The Dollar To Weaken, You Buy Puts


Expecting major movement on the dollar
BUY A STRADDLE
Expecting Significant Movement for the U.S. dollar vs. euro
Exchange Rate (EUI) EUI is currently trading at $77.82. You are expecting significant movement on the dollar relative to the euro but uncertain as to which direction. Buy 90-Day $78 Call Buy 90-Day $78 Put Net Debit Downside Breakeven (B/E)* Upside Breakeven (B/E)* Maximum Loss $1.15 $1.40 $2.55 $75.45 $80.55 $2.55

BUY A BUTTERFLY
Neutral on the dollar/Neutral on the euro
EUI is currently trading at $77.82. You expect a very narrow movement in the dollar and euro and are not sure as which direction. You are hoping to earn an income with pre-defined limit risk. Buy 90-Day $76 Call Sell 90-Day $77 Call Sell 90-Day $77 Call Buy 90-Day $78 Call Net Debit Upside Breakeven (B/E)* Downside Breakeven (B/E)* Maximum Profit Maximum Loss $1.60 $0.90 $0.90 $0.45 $0.25 $77.75 $76.25 $0.75 $0.25
0

Exchange Rate (EUI)

For a subscription to Futures magazine call 800-458-1734.


Reproduction or use of the text or pictorial content in any manner without written permission is prohibited. Copyright 2007 by Futures Magazine Group, 111 W. Jackson Blvd., Suite 2210, Chicago, IL 60604

* Breakeven is at expiration

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