The Dollar continues to be weak, but we feel that since we are long most of the other currencies against the Dollar, some kind of “hedge” is prudent. This trade is a great hedge for any of you who are currently long The Euro, The Pound, The Yen or really almost any other currency against the Dollar, whether that be in futures or FOREX. While fundamentally the Dollar is very weak, technically we could stage a medium term counter move or dead cat bounce, and this trade would take advantage of that.
If our original idea is correct and the Dollar continues lower, we will lift this hedge if the Dollar index breaks to new lows below 82.00.
click on the chart to enlarge
Buy one March Dollar index 84 call for 65 points ($650) or less to open a position.
Max profit, assuming a 65 point fill, is unlimited but a realistic target of 86 would give this trade about a 3 to 1 risk to reward ratio. Break even at expiration, assuming a 65 point fill, is 84.65.
Max risk, before commissions and fees, and assuming a 65 point fill, is $650. This occurs at expiration with the March 2007 Dollar index trading below 84.00.
Odom & Frey
Call us at 1-866-636-6378