Wednesday, 2 January 2008

Selling some short-term EUR/USD Calls

One of my strategies this year, unless my mind is changed, is to play EUR/USD from the short side. Dollar weakness has clearly been on display in this cross last year, and I think unreasonably so, as the Euro is a fundamentally flawed currency, in that 18 (I think, I'm losing count now that Malta and Cyprus just joined yesterday) different nations can NOT share the same currency/interest-rate/monetary policy. OK, this might take 30 years to collapse, but still, a flawed currency long-term is supposed to be shorted. And yes, I know many will argue the dollar is flawed, but at least it's one nation with one monetary policy.

3 Month Chart of EURUSD

So, taking advantage of Xmas strength which has pushed it up to 1.4688 just now, I'm selling a 1.4600 call expiring Jan 11th. I'll see if I can keep pocketing premium through short call selling on the EUR whenever the opportunity looks good, and if it rockets upward, I am comfortable being outright short for the long-term.

Sold the call at 151, with my exposure being $20/point, so $3020 in premium. Of course, it's slightly in-the-money so I need about a 1 point fall over the next week and a half.


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