Skin in the Game
Market: 6E_f, EUR/USD, December Euro
Original Recommendation: Neutral premium collection strategy: Sell November 133 call and 123.50 put for 60 ticks or better
Original Projection: We see support near 1.2450 and resistance near 132, this strangle is positioned beyond these levels
Update: Take profit on the 1.2700 put
We like the idea of selling the November 133 calls and the 123.5 puts. You should be able to collect 60 ticks or $750 for the strangle. They have about 45 days to expiration, and the strikes are placed beyond what we deem to be support and resistance, 132ish and 1245ish.
We estimate the margin on this trade to be about $1,200.
Update #1 October 4th:
The Euro has found support and is grinding higher. As a result, the 123.50 put originally sold for about 30 ticks, or $375 per contract, has lost about 70% of its value. You should be able to offset the put for 10 ticks, to lock in a profit of $250 per contract before transaction costs. We recommend doing so, and will be considering selling a put with a higher strike (and more premium) at some point in the next day or so to re-strangle the Euro.
Update #2 October 5th:
We were hoping for a pullback before the rally resumed, but we aren’t sure we’ll get it. Rather than try to squeeze out a few extra ticks by waiting for some selling to re-sell a put, we’d rather make sure the trade is hedged.
We recommend selling the November Euro 1.2700 put for about 30 ticks, or $375. This will bring the delta on the trade to a more neutral, but slightly bearish, stance.
The “risk on” trade has taken its toll on the greenback and propelled the Euro higher. The Euro is trading at slightly overbought levels and could potentially reverse in the coming days. Accordingly, we recommend locking in a profit of about 20 ticks, or $250 per contract before transaction fees, on the 1.2700 put we added to re-strangle the short 1.3300 call.
We’ll look for a pullback to exit the 133.00 call.
**There is unlimited risk of loss in option selling!
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