FX traders should insure against a EUR/USD relapse
Aug 22 (Reuters) -While there is a good chance EUR/USD gains will continue, it would be prudent to insure against a near-term setback. FX traders can use a simple option to insure against a EUR/USD drop.
The euro held steady near its highest in more than a year against the dollar on Thursday, after solid euro zone business activity data and ahead of euro zone wage numbers that will shape the path of interest rates for the European Central Bank. EUR/USD hit 1.1173 on Wednesday, according to EBS data.
However, there are signs this latest EUR/USD rally is stretched and could see another reversal like it did when it peaked at 1.1139 in December and July 1.1273 last year. There could be a big setback to back below 1.1000 in coming sessions.
Those who want to protect against a short-term EUR/USD slump could buy a one-week 1.1140 EUR put option at a cost of 38 pips, priced with spot at 1.1143. Profit potential is unlimited if spot is below the 1.1102 breakeven point at the Aug. 29 expiry. Losses are limited to the 38 pips premium paid.
For more click on FXBUZ
Daily Chart: https://tmsnrt.rs/3MiwPWo
Fenics Option Pricing Grid: https://tmsnrt.rs/3WSnBoV
(Martin Miller is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
