Monday, February 22, 2010

The U.S. Dollar is Erratic: Profiting From the USD Going Up or Down

The US Dollar continues to act erratically in the last couple of weeks. It depends on so many factors and so many unknowns than rather than trying to guess its future direction, investors may use straddles instead.

With straddles, profit can be achieved regardless of direction, as long as the underlying stock moves the necessary amount.

Here are straddles (strangles) for the popular UUP ETF. The moves required where computed with our StraddlesCalc Tool. We show two months: March and April.

The maximum moves required appear to be quite small, but please remember that we are dealing with currencies here, and they normally do not move that much. However, these are not normal conditions. Here is the chart of UUP over the last 6 months:

A move of about 3% means a dollar move of $0.74, either $22.92 or $24.41. As you can see from the chart UUP has reached the lower range, but not the higher range in the last 6 months.

Note: You may receive technical analysis and alerts of these stocks, sent automatically to you, by entering the symbols in the Technical Trend Analysis Tool, (powered by INO).

Please do your own due diligence. This is not advice. Options are very dangerous and may cause 100% loss.

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Crash said...

Your March put premiums are off - suspect you mean 4c not 40c or $0.04 not $0.40.

The Shocked Investor said...

Thank you very much Crash!

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