Investors using FX options to position for future EUR/USD moves favour a particular bet - leveraged EUR call/USD put spreads.
EUR bulls may find it encouraging that users of the derivative are positioning for further EUR/USD gains, but these spreads are leveraged, so they see a limit to EUR/USD's upside.
They may not be expecting a quick rally either, but more of a grind, with expiries popular around a three-month horizon.
An example of a leveraged EUR call spread would be buying the right to buy EUR/USD at 1.2200 in three months and selling the right to buy it at 1.2500.
The lower strike will cost more than the higher strike, so by selling a bigger amount of the 1.2500 EUR call, the overall premium can be significantly reduced if not completely erased.
This strategy means profit is capped at the higher strike, but losses are incurred when it trades above that level.
FX options offer clues on expected reaction to ECB policy decision nL1N2IP0J3.
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