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.
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Trade Alert - (FXE)- BUY
Buy the Currency Shares Euro Trust (FXE) May, 2016 $113-$116 in-the-money vertical bear put spread at $2.64 or best
Opening Trade
5-5-2016
expiration date: May 20, 2016
Portfolio weighting: 10%
Number of Contracts = 38 contracts
You can pay all the way up to $2.75 for this spread and it still makes sense.
If you can?t trade options then buy the ProShares Ultra Short Euro ETF (EUO), the 2X short Euro fund.
Yes, you probably think I?m nuts strapping on a position ahead of the April nonfarm payroll tomorrow.
However, I believe we?ll get a positive report, around the 200,000 print the Dept. of Labor has been reporting monthly for the past two years.
That means the economy is speeding up, not slowing down, and that interest rate hikes will happen sooner, and not later. The Q1 mini recession is now behind us. The dollar should rise and the currencies should fall.
The Currency Shares Euro Trust (FXE) March, 2016 $103-$106 in-the-money vertical bull call spread is a bet that the Euro won?t rise above $113 by the May 20 expiration in 10 trading days.
In other words, the (FXE) would have to run up to a new one year high within the next ten trading days for us to lose money on this trade. That is a bet that I am willing to make.
Now that the market has thrown out any chance of a Fed rate hike in June, the capacity for the dollar to disappoint has burned out. Futures markets are only pricing in a 15% probability of such a move.
On top of that, the dollar has been strong for the past seven consecutive Mays. I ascribe this to the large numbers of international trade transactions that settle this month, which generate a lot of dollar buying and foreign currency selling.
This is against a backdrop of foreign governments looking to weaken their own currencies at every opportunity.
Look for someone in Japan to say something very negative next week when they return from the Golden Week vacations. For them, the yen at 107.00 is nothing short of the apocalypse for their economy.
Notice that the greenback has been strong against all currencies since the big turnaround on Tuesday.
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of optionshouse.
If you are uncertain on how to execute an options spread, please watch my training video on ?How to Execute a Bear Put Spread? by clicking here at http://www.madhedgefundtrader.com/ltt-executetradealerts/. You must me logged into your account to view the video.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 38 May, 2016 (FXE) $116 puts at????.?.??$4.30
Sell short 38 May, 2016 (FXE) $113 puts at.????..$1.66
Net Cost:???????????????????......$2.64
Potential Profit: $3.00 - $2.64 = $0.36
(38 X 100 X $0.36) = $1,368 or 13.63% in ten trading days
