EUR: Selling Option Strangles

This text was sent to DeCarley brokerage clients on May 20th 2015.There is substantial risk of loss in trading futures and options. Past performance is not indicative of future results.On the commodity radar:

* Implied volatility in euro options is elevated, and recent swings in the currency has helped to pump up option prices. Let’s sell a strangle using the July options.

The Euro

Sell July Euro Currency 116.50 calls and 105.50 putsIntense volatility in the Euro has created an environment in which it is possible to sell strangles with distant strike prices at attractive pricing. For instance, It is possible to collect nearly $1,000 for a strangle with a 10 handle spread expiring 44 days from now. Last year it would have required a 4 to 5 handle spread to collect similar premium.Following the recent thrashing, we suspect the Euro will have a tendency to consolidate. Further, seasonals suggest stabilizing trade going into early June. Accordingly, we like the idea of selling the July 116.50 call and the 105.50 put for a total of about 70 ticks, or $875. This creates a scenario in which the trade makes money or breaks even anywhere from 117.20 down to 104.80 if held to expiration. Ideally, we’d like to see prices stay within the strike prices; if so it would be possible to yield the max profit of $875 before transaction costs (assuming the trade was held to expiration). This gives the Euro nearly 500 ticks to move in either direction, and, in our opinion, offers attractive odds of success.Should the Euro travel above 116.50, or below 105.50, the risk is theoretically unlimited and is similar to being short or long the futures contract. **There is substantial risk in trading options and futures. Doing so may not be suitable for everyone. These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. **Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Website administrators, affiliated brokers, employees etc. may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. **Past performance is not indicative of future results (seasonal data tells us what has happened in the past, not necessarily what will happen in the future).**There is unlimited risk in selling options!

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