FXE Analysis

CurrencyShares Euro ETF (FXE)

Update 3/5/2018: FXE rose sharply on May 1 and the day after, requiring a re-evaluation of the Elliott wave count. The Fisher Transform metric signaled an uptrend on May 2. I exited for a $0.95 debit with the underlying share price at $118.61.

Shares rose by 1.1% over five days, or a +81% annual rate. The options position produced a 33.7% loss for a -2,459% annual rate.

The magnitude of the rise made it impossible, within the Elliott wave rules, to consider the decline from Deb. 26 to still be in force as a 3rd wave to the downside at the Minuette level, which is the level I trade. It is somewhat ambiguous at this level, but I read it as an ongoing 2nd wave, a correction to the upside or sideways that, when complete, will mark the beginning of the 3rd wave.

My goal is to catch that 3rd wave down once it begins, and in the meantime to watch for clarification of the wave pattern.


I have entered a short bear call vertical spread on FXE, using options that trade for the last time 51 days hence, on April 20. The premium is a $0.63 credit and the stock at the time of entry was priced at $117.31.

I made the decision to enter the trade in my account based on a bearish Elliott wave count and a continuing of a downtrend signal from the Fisher Transform metric.

Implied volatility stands at 8%, which is half the VIX, a measure of the volatility of the S&P 500 index.

FXE’s IV stands higher than 37% of its daily readings over the past year  and stands in the 66th percentile of its most recent broad movement.

The price used for analysis was $117.40.

Premium: $0.63 Expire OTM  
FXE-bear call spread Strike Odds Delta
Calls
Long 120.00 77.3% 24
Break-even 117.37 66.8% 35
Short 118.00 56.3% 45

The premium is 63% of the width of the position’s wings.

The risk/reward ratio is 2.2:1.

The bid/ask spread was 7.9%.

By Tim Bovee, Portland, Oregon, Feb. 28, 2018

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.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

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