NaughtyPines

TRADING IDEA: FXE MAY 20TH 111/JUNE 17TH 113 LONG PUT DIAGONAL

AMEX:FXE   GUGGENHEIM CURRENCYSHARES EURO CURRENCY TRUST
I don't frequently put on debit spreads, but here's an instrument in which I have a fairly firm directional bias and which, additionally, has extremely low implied volatility at this point in time, making it ideal for either a calendar or a diagonal, both of which benefit from expansions in volatility (which will occur in the instrument assuming further weakness in the Euro             and/or Greenback strength).

Here's how the setup plays out: (1) Going into expiry of the short option, price stays above the short put, at which time you generally roll it to create a long put vertical with the back month expiry; (2) Price breaks below your short option, at which time you take the entire setup off in profit when the opportunity presents itself, but prior to the expiry of the short put.

There aren't really any metrics to present for this kind of spread, beyond the fact that this will cost you a 1.54 debit to put on ($154), which represents your max loss in the setup. This is because maximum profit will be dependent on how much the underlying moves for the duration of the setup ... .
Comment: No fill and wasn't going to chase price ... .
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