I alluded to this move in yesterday’s daily Commodity wrap and it looks like the move anticipated is underway. As of this post futures are trading lower by 0.74% and under their 50 day SMA (dark blue line) and 34 day EMA (orange line). I am operating under the influence that an interim high was established last week at the 61.8% Fibonacci level as all trades above 1.5400 in September futures have been rejected. See stochastics on the chart below have started to roll over from overbought levels. The 38.2% Fibonacci retracement (the lower jagged line) and the 20 day MA (light blue line) come in around the same level at $1.5170. A trade below that pivot point in the coming sessions I would be looking to book profits.
As for strategy…
British Pound Futures, July 30, 2013
I have two suggested plays here depending on traders account size, risk tolerance and if they trade future and/or options:
- Get short September futures and sell an out of the money put option 1:1. As of this post futures are at $1.5244 and $1.52 strikes are trading at just over $1,000 per with a delta of 46%. You should make about half of the underlying futures move and have $1,000 cushion.
- Back ratio spread selling nearby and buying multiple lower strikes. Yesterday for some clients we sold (1) $1.53 and bought (2) $1.52 and bought (1) $1.49. A positive delta of 50% and the trade cost $800 plus fees and transactions costs. Remember on trades like this the fees are elevated because you are trading multiple legs.
As for the docket we have a full calendar the remainder of the week…here are the highlights:
FOMC today and tomorrow, BoE and ECB on Thursday in addition to Q2 US GDP, and then rounding out the week NFP # on Friday. A busy reporting week can cause increased volatility so stay alert.
Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.
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