CurrencyShares Euro ETF (FXE)

Update 1/11/2018: I exited FXE for a loss as the options composing the position approached their final day of trading, Jan. 19. I shall roll it forward quickly into a new bear position, although I may decide to alter the structure to an iron fly or iron condor to provide greater protection against reversals.

The options went for a  $1.99 debit, producing a $0.54 loss. I shall defer calculation of results until completion of the series.

Update 11/7/2017: I have rolled FXE forward to another bear vertical position. 

I used options that trade for the last time 73 days hence, on Jan. 19.

Implied volatility stands at 7%, which is 7/10ths of the VIX, a measure of the volatility of the S&P 500 index.

FXE’s IV stands in the 15th percentile of its annual range and the 22nd percentile of its most recent broad movement.

Premium:	$0.45	Expire OTM
FXE-vertial	Strike	Odds	Delta
Calls
Long	116.00	83.9%	17
Break-even	113.45
Short	113.00	64.5%	37

The premium is 15% of the width of the position’s wings.

The risk/reward ratio is 5.7:1.

The bid/ask spread is 2.2%.

I entered with shares at $111.91. The risk/reward ratio is high, but for a longer-term position buttressed by Elliott wave analysis, I’m willing to take that risk.

Update 11/6/2017: FXE fell steadily after I entered a bear vertical spread on Oct. 26 and exceeded my goal on Nov. 6. I rolled out at 52.4% of maximum potential profit.

The options went for a $0.20 debit with shares at $111.81.

I intend to roll the position forward on Nov. 7, and so will defer calculation of results until the roll series is complete.

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FXE tracks the EUR/USD currency pair, which peaked on Sept. 8 and has since been working its way lower. My reading of the Elliott wave count suggests a continuing downtrend, and I shall enter a bear vertical options spread.

I shall use options that trade for the last time 50 days hence, on Dec. 15.

Implied volatility stands at 7%, which is 3/5ths of the VIX, a measure of the volatility of the S&P 500 index.

FXE’s IV stands in the 19th percentile of its annual range and the 11th percentile of its most recent broad movement.

The price used for analysis was $112.89.

Premium:	$0.42	Expire OTM
FXE-vertical	Strike	Odds	Delta
Calls
Long	114.00	66.7%	35
Break-even	116.42
Short	116.00	841.0%	17

The premium is 21% of the width of the position’s wings.

The risk/reward ratio is 3.8:1.

The bid/ask spread is 4.6%.

Decision for My Account

I have entered a position on FXE as described above. The stock at the time of entry was priced at $112.69.

By Tim Bovee, Portland, Oregon, October 26, 2017

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.