Option Idea: Long Call in the Dollar Index

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Option Idea: Long Call in the Dollar Index

the picture shows JULY 31, so October 2007 contract is 2.5 months away , DX is trading at 81 , so 2.5 months away CALL of 250 is very cheap . It seems DX option far out of money are less expensive given time 2.5 months.

asr: we can buy these kind of options for 1 month period ahead , out of money seems for $500 which can be used as insurance.
- 2/10/09 DX traded at 86 , March 85 strike call ( in the money ) is 21.00 as per LInd that is $2100
- seems good since 85 strike call is in the money by $1000 ( 86 -85 ) , so prerium is only $1100

- GBP currently at 1.44 , CALL option is 30 that is $1900 - volume 22
- GBP 1.56 strike ( out of money ) CALL is 19 that is $1300 - volume 87 , highest strike volume as per Lind
- EURO 128 strike ( at money) CALL 300 => $2700
- EURO 136 strike $740

Market: October Dollar Index (DXZ7)
Tick Value: 1 point = $10
Trade Description: Long Call
Option Expiration Date: 11/09/07
Max Risk: approximately $250
Max Profit Potential: Target is 200% of the risk.

Buy an October 2007 Dollar Index 82 call for approximately 25 points ($250) to open a position.


Profit Goal
Or profit goal is to catch a move above 82.50 on the Dec. Futures contract. Break even point is 82.25 assuming a 25 point fill. 100% gross profit would be realized at expiration if the market is at 82.50.

Risk Analysis
Max risk, before commissions and fees, and assuming the above mentioned fill would be $250. The full premium paid for the option is lost at expiration if the market expires below 82.00.

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http://www.tigersharktrading.com/authors/41/Jamie-Saettele

5/11/2008 - DX options sample

Hello Everyone.

Welcome to The J.E.D.I. Trader.

To learn more about my Stocks, Options & Options on Futures Trading Service, click here.

INTERMEDIATE TREND OF THE U.S. DOLLAR MARKET: UP

STOCK/OPTION/FUTURE UNDER ANALYSIS: JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION

TICKER SYMBOL: DXM874.00C (Note: For some firms the ticker symbol may be different)

4/26/2008 ENTRY ALERT: Buy one DXM874.00C (June 2008 74.00 U.S. Dollar Index Call Option)

4/26/2008 CLOSING PRICE OF JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION:

$.555 ($555.00)

5/4/2008 (WEEK 1) CLOSING PRICE OF JUNE 2008 74.00 U.S. DOLLAR INDEX CALL OPTION:

$.680 ($680.00)

5/11/2008 (WEEK 2) CLOSING PRICE OF JUNE 2008 74.00 US. DOLLAR INDEX CALL OPTION:

$.430 ($430.00)

OUR BREAK EVEN OPTIONS POINT: $.585

DOLLAR GAIN/(LOSS) ON JUNE 2008 U.S. DOLLAR INDEX 74.00 CALL OPTION FOR THE FIRST WEEK ENDING MAY 4, 2008:

$95.00

DOLLAR GAIN/(LOSS) ON JUNE 2008 U.S. DOLLAR INDEX 74.00 CALL OPTION FOR THE SECOND WEEK ENDING MAY 11, 2008:

($155.00)
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Pricing U.S. Dollar Index Futures Options: An Empirical Investigation

This paper develops a pricing model and empirically tests the pricing efficiency of options on the U.S. Dollar Index (USDX) futures contract. Empirical tests of the model indicate that the market consistently overprices these options relative to the derived model. This overpricing is more pronounced for out-of-the-money options than for in-the-money options and more pronounced for put options than for call options. To validate the above results, delta neutral portfolios are created for one- and two-day holding periods and consistently generate positive arbitrage profits, indicating that on average the market overprices the options on the USDX futures contracts. Copyright 2003 by the Eastern Finance Association.


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asr: for somebody intersted in forex fundamental analysis , you can get this FXCM analyst articles 95 pages see next/prev and see how good he is .
- it seems this site has in general good authors in all categories currencies, options, stocks etc..
Jamie Saettele
Jamie Saettele is a Technical Currency Analyst for Forex Capital Markets (FXCM).