Trading Options In Currency ETFs


Hey everyone, Kirk here again at optionalpha.com
and first, sorry that this video is later in the evening. I had like back to back to back coaching sessions
today which was just crazy. I’m just still getting this out obviously
to make sure that we cover up all the trades that we had both today on Tuesday, September
19th and also yesterday on Monday. Now, trades on Monday that we got into, we
only got into one. Again, if you’re new to Option Alpha, sometimes
if we just have one single trade in a day, we may not cover it in a whole video update
for the whole process and the whole sequence that goes through it, but we’ll always cover
it in the next day and it’s never time sensitive enough that you have to get into it that same
day. If you need to wait or want to wait, that’s
okay. Just backtracking a little bit to Monday,
we went ahead and got into obviously the trade in FXY, another iron butterfly mainly because
premium is so much better when you can sell at the money options versus just selling naked
out of the money options in FXY. We sold the at the money 86s and then bought
options out on either end at 89 and 83 pretty cheap. It was a pretty decent trade. Obviously, it’s a new one for FXY that we
tried to get into last week on Friday, but just didn’t get filled. For FXY, I mean, the story for us is really
that the stock has had a pretty good down move which is great and implied volatility
has popped up a little bit, so we want some exposure. We want to get some currency exposure in our
portfolio. That’s why we did FXY yesterday. That’s why we’re doing FXE today and we’re
just trying to diversify what we have here obviously. The next one that we got into today was the
FXE iron butterfly. We centered it actually at 15.5. Now, I really don’t like to trade the half
strikes, but it was really the best decision in this case for FXE because the stock was
trading exactly at 15.5. If you don’t like the half strikes, if that
confuses you or throws you off, then go for the very tight iron condor, so the 15s and
the 16s. We just wanted to collect as much premium
as possible here and we went for the 15.5s. Then again, notice that we bought options
out an equal distance on either end pretty cheap here. Around like $10, $15 on average is what we
end up paying for these. The call side is actually a little bit more
expensive than the put side which is weird for FXE. We don’t often see that type of reverse
skew happening. But again, with FXE, we want some exposure
here. We think that given that the technicals are
still starting to challenge the topside of where they’re at, the overbought type scenario,
it’s not all overbought yet, but they’re starting to challenge it that we could continue
to trade sideways here for FXE. That’s why we’re starting to build these
small positions. Really, for me right now with October, we’re
about 31 days out from expiration. We’ve got about another day or two that
we can start adding positions to October before we just have to cut it off and run with what
we have. We start getting inside that 26, 25 day limit. We want to cut off October which has still
been pretty good. We’ve got a lot of premium on and we want
to start building out November. Again, if FXE moves considerably, we’ll
add to this. If not, this might be the only position that
we have in FXE for October and again, that’s okay. We’ll start building out November. As always, hopefully you guys enjoy these
video updates. If you have any comments or questions, let
me know in the comment section. Until next time, happy trading!

Leave a Reply

Your email address will not be published. Required fields are marked *