The DeCarley Perspective Trading Newsletter

Implied volatility is high, let's sell euro currency strangles

This edition of the DeCarley Perspective was emailed to DeCarley Trading commodity brokerage clients on August 26th, 2015. 

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On the Commodity Market Radar:

* Implied volatility has come back to the Euro, let's take this opportunity to sell strangles using the October options.

 

Euro Currency Futures Option Strangle

 

We Like Selling October Euro Option Strangles in the Futures Market

We've been waiting for volatility to pick up somewhere to give us an opportunity to sell premium. As it turns out, it has picked up everywhere. However, we are most comfortable selling options in the currency market due because it seems to be panicking a little less than some of the other financial futures markets.

The Euro has experienced a violent rally and pullback in recent sessions. As a result there is an opportunity to sell options beyond support and resistance levels for an attractive return. Specifically, we like the idea of selling the October euro 108 put and the 120 call for about 56 ticks, or $700.

This trade has 45 days to expiration. Assuming the trade is held to expiration, the maximum profit potential is $700 before transaction costs and occurs as long as the euro is between $1.08 and $1.20. That gives us roughly 600 points on both sides of the market in room for error.

 

**There is unlimited risk in selling options!

**There is substantial risk of loss in trading futures and options.** 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. 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. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.

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