Foreign exchange traders can use a simple option strategy to insure against a bigger EUR/USD setback in coming sessions, as a potential top could be forming in this currency pair.
EUR/USD suffered a setback on Thursday after the European Central Bank (ECB) lifted interest rates and signalled it was far from finished, raising fears about the potential damage to the global economy and sending investors towards .
EUR/USD bulls were stopped in their tracks on Thursday at 1.0737 rise on the EBS, just ahead of the major 1.0744 Fibo, a 61.8% retrace of 1.1495-0.9528 2022 (EBS) drop.
Those who want to insure against a EUR/USD fall can buy a one-week 1.0620 EUR put option at a cost of 40 pips, priced with spot at 1.0635.
Profit potential is unlimited if spot is below the 1.0580 breakeven point at the Dec.
23 expiry, while losses are limited to the premium paid.
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