Options Trading News

November 26, 2012  Mon 2:45 AM CT

The euro is attempting to rebound, but one investor wants protection.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,500 March 126 puts on the CurrencyShares Euro Trust for $1.23. An equal number of December 126 puts was sold at the same time for $0.20, but volume was below open interest in those, which indicates that an existing position was closed and rolled forward in time.

The investor paid $1.03 and now has an additional three months of downside production on the fund. Adjusting the contracts let him or her avoid the accelerating pace of time decay that will occur in the December options over the next four weeks, thus saving money. (See our Education section)

The FXE rose 1.25 percent to $128.91 yesterday. The exchange-traded fund touched a two-year low around $120 in July amid worries about the Greek debt crisis but then rallied on a big short squeeze. The euro has been consolidating for the last 2-1/2 months, and the fund now seems to be finding support at the key $126 level.

Overall option volume in FXE was quadruple the daily average on Friday, despite the session being shortened after Thanksgiving. The put roll accounted more than one-quarter of the total.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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