Trade Alert Update- (FXE) November 18, 2011

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert

Buy the Euro ETF (FXE) January, 2012 $134 Puts at $3.20 or best

Opening Trade

11-18-2011 – 9:30 am EST

expiration date: 1-19-2012

5% weighting

($5,000/100/$3.20) = 16 contracts

I am going to use the one cent gap opening this morning to re-establish my short position in the Euro through buying the Euro ETF (FXE) January, 2012 $134 Puts at $3.20.

My logic here is both strategic and tactical. For a start, I want to hedge my remaining “RISK ON” positions in the (TBT), (JEF), and (SLV) with a nice dose of “RISK OFF” with an (FXE) short. That should reduce the volatility of my P&L going into year end.

I also think there is a great chance that, at the very least, the beleaguered European currency will retest the $1.31 low we saw in early October. This should happen possibly as early as next week, and by year end at the latest.

Now that that moron, former ECB president Jean Claude Trichet, is out of office, the way is clear for the new guy, Mario Draghi, to move full speed ahead on additional interest rate cuts. A recession in Europe in 2012 is now a sure thing, possible a deep one, and there is no reason to keep rates high for one additional nanosecond. As a person of Italian heritage myself, I can tell you that if you want to get anything done in a hurry, put an emotional Italian in charge. This is all hugely Euro negative.

If we hit my $1.31 target, that would take the January, 2012 puts from $3.20 to $5.30, a gain of 66%. That would add 328 basis points in performance to my notional $100,000 portfolio for 2011. And I also have a shot at much bigger gains if we quickly break this support, something that many of the big hedge funds are now betting on.

The fat lady is singing for the Euro, and she is doing so loud and clear.