Tuesday, October 16, 2007

Big winner and another chance?

A few weeks ago, I published a trade with both the spot market and the CDD ISE options looking for a bounce off of the 1.00 mark for the USD/CAD. If you would have bought the 100 November puts as described in the post, your position would have moved from 1.35 to 2.45. You would have had a maximum risk if $135 per contract and based on your risk you would be up $110 or 81% return on your maximum risk. Not too shabby. The spot market, if sold at 1.00 would be up $220 with variable risk available based on where a trader determined was the appropriate stop loss. Does this sound like you? "I frequently am right about direction but get stopped out of my trades." If so, lean to the options, if you are frequently right and don't get stopped out, go with the spot. If you are frequently wrong and always get stopped out, please send check to Blake Young's Tahiti trip fund, this way at least one of us will get benefit from your money.

I hear it frequently, if you set your stops too tight, start looking at these options, if you are giving yourself enough room in your trades, the spot usually makes them most sense and money.

Today, what are we looking at? The USD/CAD has pulled back to a short term resistance level. The pair has not moved a lot when it probably should have. So here is the trade and the fundatechnimentals behind it. Oil- record highs, should benefit the CAD. No rate change from the BoC, this is better than the FOMC cutting rates, should benefit the CAD. TIC data for the US not only didn't show the expected $60 Billion of foreign investments coming in to the US but showed a withdraw or fleeing of $69 Billion in foreign monies, bad for the US dollar.

No significant move from the pair, this could be a chance to sell will minimal risk or buy in to the CDD put. I like the December 97.50 put for $1.35 or $135 per contract. Fixed risk lots of potential 8 weeks of time to play with. The USD/CAD would probably need a little wider stop on this one 99.15 or even back above the $1.00 mark. Pick your poison.

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