NaughtyPines
Short

LADDERING FXE SHORT VERTS ON RISK OFF EVENTS/BOUNCES

AMEX:FXE   CURRENCYSHARES EURO TRUST
Several weeks ago, I began to set up laddered short call verts in FXE             (the EURUSD             proxy). My original idea was to set up short call verts at 112/115 at varying expiration from here through December or January based upon the notion that the Fed was poised to tighten and, now, it appears, based upon the possibility that the ECB may initiate additional easing.

As I may have pointed out in that earlier post, FXE             is not ideal for this because of the nature of the expiries offered: greater than 45 DTE             , you're generally left with only quarterly expiries. Generally, if you're going to ladder, you want to ladder at the beginning of each month for the next three monthly expiries out, so I had to set up a September rung and a December rung and then wait for an opportunity to fill in an October rung (and potentially a January rung at the same time) when it became available.

Then, however, we saw a resort to the Euro             as a risk-off safe haven on US and European equities weakness, somewhat of a new twist in the general pattern of risk-off flight to safe haven currencies ; the go-to has generally been the Yen (concern over Asian market weakness may have muted investor desire to flee there).

In light of the fact that resort to the Euro             as a safe haven currency may not be transitory, I'm modifying my laddering to take advantage of bounces in the Euro             (whether the result of risk-off or Greenback weakness) and will set up future short call verts largely at the 1 SD             instead of at 112/115 (even though I think that is still a pretty good resistance level).

Adding right here is, unfortunately, not ideal; I'll look for bounces in FXE             back toward 112.50.
NaughtyPines
a year ago
Watching this closely ... . We're grinding up to the 112 area again; if there's another risk-off event like we had in late August (fleeing to the Euro, who woulda thunk?), I'll add another short call vertical somewhere ... .
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