As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Trade Alert - (FXE)
Sell the Currency Shares Euro Trust (FXE) September, 2014 $133-$135 in-the-money bear put spread at $1.97 or best
Closing Trade
8-25-2014
expiration date: September 19, 2014
Portfolio weighting: 20% down to 10%
Number of Contracts = 61 contracts
?
We have snatched 92% of the potential profit in this trade, riding the Euro (FXE) down on the short side, from $1.33 down to $1.30. The risk/reward of continuing with such a large position is no longer justified.
So I am going to reduce my overweight position down from 20% back to a normal 10%. If you are similarly overweight the short Euro ETF (EUO), I would also be lightening up.
I have not suddenly fallen in love with the beleaguered continental currency. I think we are headed towards $1.27, $1.20, and eventually $1.00. This is just a tactical move.
That way, if by some miracle, we get a two-cent rally in the Euro, I will have plenty of dry powder to reload with and add more shorts.
I wish all my trades were this easy. Since I doubled up on the short side, the Euro has been in a complete free fall. European dithering has been one of the lowest risk bets of 2014.
That said, I think I?ll get back to cleaning up my earthquake damage.
Keep in mind that the options market is highly illiquid now, so don?t hold me to these prices. They are ballpark estimates, at best.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.
Here are the specific trades you need to execute this position:
Sell 61 September, 2014 (FXE) $135 puts at?????$4.88
Buy to cover short 61 September, 2014 (FXE) $133 puts at...$2.91
Net Proceeds:??????????????????.....$1.97
Profit: $1.97 - $1.63 = $0.34
(61 X 100 X $0.34) = $2,074 or 2.07% profit for the notional $100,000 portfolio.
