On the the 20th of March when EURUSD reached a resistance level, I argued on how one can benefit by opening simultaneous long call and long put positions to benefit from the volatility regardless of the direction of the move (read it here). The prices that day on my broker (IG) were:
1.1350 (at-the-money) long call April 2019 = 42.3
1.1350 (at-the-money) long put April 2019 = 64.3
The targets I put were 1.1450 for the long call and 1.1250 for the long put. The prices for these two contracts were:
1.1450 long call April 2019 = 23.8
1.1250 long put April 2019 = 14.2
So, the price almost touched the long call target on the same day.
The price for the long call contract (at the time the contracts were closed) went from 23.8 to 50.3 paying 100% (and some) almost immediately.
Position #1 = CLOSED
At this point, you can close the long put that you bought as a security, and deduct the loss of the discounted contract (which was priced at 6 at the time, so 6-14.2=-8.2 from your profits. That would be 50.3 - 8.2 = 42.1 which would still be a great profit from the buying price of 23.8
But since the parity is volatile, one can choose to let the put contract run and take the whole loss in case it keeps going up. In our case, the pair took a dive on the 22nd, all the way down to 1.127. Our long put was priced at 31.7 (went higher, but that was the price at the time the contracts were closed), so, it paid another 100% (and change..) to our overall position (bought at 14.2).
Position #2 = CLOSED
This is the great thing about options when there is volatility. You can trade both directions, and be very profitable. As long as there are fluctuations, you are good to go. Or, you can simply open opposite positions to serve as security (that's the smart thing to do..)
Have a great weekend everybody!
1.1350 (at-the-money) long call April 2019 = 42.3
1.1350 (at-the-money) long put April 2019 = 64.3
The targets I put were 1.1450 for the long call and 1.1250 for the long put. The prices for these two contracts were:
1.1450 long call April 2019 = 23.8
1.1250 long put April 2019 = 14.2
So, the price almost touched the long call target on the same day.
The price for the long call contract (at the time the contracts were closed) went from 23.8 to 50.3 paying 100% (and some) almost immediately.
Position #1 = CLOSED
At this point, you can close the long put that you bought as a security, and deduct the loss of the discounted contract (which was priced at 6 at the time, so 6-14.2=-8.2 from your profits. That would be 50.3 - 8.2 = 42.1 which would still be a great profit from the buying price of 23.8
But since the parity is volatile, one can choose to let the put contract run and take the whole loss in case it keeps going up. In our case, the pair took a dive on the 22nd, all the way down to 1.127. Our long put was priced at 31.7 (went higher, but that was the price at the time the contracts were closed), so, it paid another 100% (and change..) to our overall position (bought at 14.2).
Position #2 = CLOSED
This is the great thing about options when there is volatility. You can trade both directions, and be very profitable. As long as there are fluctuations, you are good to go. Or, you can simply open opposite positions to serve as security (that's the smart thing to do..)
Have a great weekend everybody!
Trade closed: target reached:
Positions closed.
1) Long call: Opened @1.1350, target @1.1450 (long call)= 23.8 Close= 50.3
(per contract X contract size in $)
2) Long put: Opened @1.1350 target @1.1250 (long put)= 14.2 Close= 31.7
(per contract X contract size in $)
1) Long call: Opened @1.1350, target @1.1450 (long call)= 23.8 Close= 50.3
(per contract X contract size in $)
2) Long put: Opened @1.1350 target @1.1250 (long put)= 14.2 Close= 31.7
(per contract X contract size in $)