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May 16 - 08:55 AM

EUR/USD - COMMENT-FX Traders Can Insure Against Bigger EUR/USD Gains

By Martin Miller  —  May 16 - 06:40 AM

Foreign exchange traders can use a simple option strategy to insure against a potential bigger EUR/USD rise in coming sessions.

EUR/USD saw a big jump on Wednesday after data showed a slowdown in U.S. inflation, as the U.S. dollar slumped.
It broke and closed above the daily cloud, that currently spans the 1.0816-1.0838 region, a very bullish development.
EUR/USD looks set for bigger gains to break above the 1.0934 Fibo, a 61.8% retrace of the 1.1139 to 1.0602 (EBS) drop.
Fourteen-day momentum is positive, reinforcing the overall upside bias.

For those FX traders who want to insure against a bigger EUR/USD rise can buy a one-week 1.0880 EUR call option at a cost of 30 pips, priced with spot at 1.0872.
Profit potential is unlimited if spot is above the 1.0910 breakeven point at the May 23 expiry, while losses are limited to the premium paid.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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