anyone use options on EUO for their 'cheap' euro shorts?

Discussion in 'Options' started by pikerforlife, May 21, 2012.

  1. rather than try to hold open a 6E, or even a M6E, position for 6+ months, considering the cost/hassle to roll, and the mark to market aspect, i've found it easier to sleep at night on a euro short through holding spreads, or outright calls, on EUO.

    anyone else finding this as an alternative to a short EUR/USD forex position, or shorting a 6E / M6E futures contract?

    of course, i'm not looking for the same sort of moves as the futures/forex markets, but still, i'd rather capture the meat of the collapse from 1.30 to 1.18/1.20ish which i feel will happen over the coming summer/fall/winter. i feel i'm confident on direction, but i am not so confident on time/strength of the move. i think any back touch of 1.30/1.32 will be very short lived at this point.

    all this said, and using a piece of string and an imaginary ruler (roughly comparing the three instruments), i'm thinking EUO is due for a move through 21 to play the 23-26 range before the end of the year, with support at 20.

    i'll be getting into call calendars for NOV/JAN at 24 and 25, as well as, debit spreads with call verticals for NOV 23/24. if i can get these on for <.15 each, that's great, if i can hold off and/or get fancy with trying to leg into them, trying to time the last gasp bounce of the euro, i might get them on cheaper than that (free would be ideal!) if i chase the euro down here, or hit the high ask of the day or just buy the spread at the market (we've all done it), i might pay .20 each. i'm in no rush, a few here, a few there, over the next week or two.

    of course, i'm looking for the verts to pay out .80 or the full buck, come NOV, if eur/usd sits around/under roughly 1.24. i'm bearish euro, so i think this is possible, even with a bounce from 1.18/1.20, or with a back kiss of 1.30/1.32.

    with the calendars, i'm hoping the pair does stave of utter collapse sub-1.18 to 1.15 and towards parity. (i'll still have time to get out easily, with a smile.) i feel there will be support at 1.20, even if from a devaluing dollar rather than a strengthening euro, at that point of the global train wreck. if there is no next step down in the pair, but only a mild roll over accident, my calendars will help pay for the verts, it will be a wash after commission, or slightly positive.

    if all the world goes happy and the euro finds legs above $1.30 through the elections, i'm out a few hundred, if the pair is below $1.24 come the vote, i'm up a couple thousand. i can sleep at night with that one at least.

    maybe i'll update, maybe i wont, but i fully expect someone to let me know when they are only worth .05 either way,... i'll let everyone know if they grow.

    thanks for reading,.. all critics welcome,..

    good luck to all!

  2. I thought about trade like this all weekend. I like debit spread idea - FXE spread might be easier to get filled, but you'd have to go longer or shorter strikes (then Nov).

    One thing to consider is when Greece exits is after the initial Euro fall (10% sounds possible) - I think we could see a huge rebound in very short time frame upto 140s. One thing I'm unsure of is would the Euro fall right away ? or would it go straight to spiking as a Greek departure "should" strengthen the Euro considerably.

    Hence I wouldn't do calendars cause if timing is bad you could get terribly whipsawed.

    The Euro might slide this summer but if they manage to kick the can again ... the Euro will rebound.

    (ps Great topic!)
  3. was filled on the the first pull at the NOV/JAN 25 calendar @ .15, but even though the EUO waned all day the mark on the other two OTM spreads crept up from .15 to .175/.20 by close, go figure. i'll try to wait for these to come to me still.

    i agree, with the unknown of the initial action of an eventual exit of Greece (or even a more firm can kicking) to the pair, one has to be ready for wide swings either way when the headlines hit and are then priced in later. this is why i'm using OTM options here, as i feel the moves will be muted, and the greater trend will still be down for the euro. i think folks will still want to be short the pair longer term, even after any short term unwinding of Greece specific events causes a crazy spike to cover.

    i'm hoping my NOV/JANs will handle this fine, if i can get the JANs for a net of .15 as/if the NOVs expire worthless, i can then write some DECs or higher JANs against them, and get a cheap/'free' shot at the end of the year play in the pair, post Greece fallout.

    if the pair spikes hard and fast (either way) in the interim, the time spreads (i hope) wont get slammed too hard, and besides, these spreads are written at .15, so the risk is all out there already, i'll let them die or fly till NOV. these aren't ATM calendars, they are a few strikes OTM still, and 5/7 months out. i'm trying to make my ride with as few bumps as possible, but still have an end goal in mind, with a reward attached.

    as for the OTM verts at 23/24, i wont chase the price past .20, as they are out there with a large enough payout if the move happens, but i do want them.

    to be honest, i began to look at the further OTM verts as i spread off my EUO 20 AUG and NOV calls by selling 21s against them last week, and while greatly reducing my downside (free spreads at this point, thanks to the timing gods), i had also cut out that nice "shit hit the fan" quadruple return potential i had holding the single calls at 20.

    actually, my biggest concern is the choppiness of any moves from now till NOV, and if these will kill the return on EUO as a daily tracking ETF, leaving it to fall short of my targets, even if the EUR/USD hit the marks i expect.
    *see referenced piece of string and imaginary ruler from original post,..*

  4. PS,

    yeah, one could just as well create similar risk/reward using put spreads with FXE, adjusting a bit for the different months and strikes available.

    while i like the fact that FXE has weeklies (more chances to write or short term hedge), and there would be finer detail possible in creating the spreads, i know i'd end up over trading it and muff it up completely. i'm trying to go the other way with this one.
  5. rickf


    I was long a bunch of EUO May 20s that I got rather cheaply on a speculative "wtfnot?" trade 3 weeks ago going into French and Greek elections. They returned a nice 125-200% depending on when I sold 'em going into expiraton week. In terms of correlation to the /6E it was about 200 pip move over that time....maybe more. Percentage-wise on the options that was awesome, but cash-wise, nothing like what I would have pulled in on via futures, obvously. (I was moving my futures account that week, so I couldn't easily trade /6E at the time, sadly.)

    While I agree long-term with the bearish Euro sentiment, at the moment I'm debating taking a speculative small short-term long Euro position to catch a potential short squeeze ..... the COT numbers pretty much show this to be a *very* crowded trade -- won't take a rumor of a hint of a whiff of something positive (blue skies on Thursday in Brussels?) to spook and squeeze folks for a few days I think.

    ETA: As with all ultra ETFs, beware holding them for more than a short period of time!
  6. I picked up the FXE Jan 13 140-150 call spread and 115-105 put spread today.

    A big swing either way and I'd sell out - take profits and double down the other side if there is enough time or look then at Jan 14.

    I think we're going to see alot more volatility in the rest of 2012 then the market is pricing in right now ...
  7. nice IC there on FXE, with the idea to cut the calls on any post exit run and double up on the puts. also, has enough time to let the pair play out, with enough time to show profit / adjust either way, and still swing for the fences.

    i've a similar plan if these end of the year spreads fade fast on a sudden up swing squeeze, by selling off the JUN or AUG call spreads i'm holding, taking that profit (if there is any left by the opening bell, if we open at 1.40 one day on the pair, :eek: ), and rolling into more 'cheap' spreads far out and down, then vacationing for the summer in Greece, while living on new drachma,... :cool:

    as for the warning on the leveraged ETFs, it's true, most of the options on them are for shite, crazy wide spreads, poor liquidity compared to the underlying, and of course the nature of such daily focused ETFs to decay / under perform whatever their benchmark is over the long term, but, with EUO as my euro short proxy i'm not quite as worried. it's not as if i'm trying to swing trade and/or time the market to the minute with TZA or UVXY here, this is a few .15 spreads out into NOV/JAN, that's all.

    good luck to all!
  8. This is a debit spread cost me about 2.20 ~ both spreads could be ITM at some point before Jan 13 ~ lol
  9. nice day for EUO, which means of course my orders sat there at the mid all day unfilled, again. stepped up the game of getting a fill on my spreads by setting an order at the mid for the long leg, with a trigger to toss out an order for the short leg of the spread at the next strikes mid. no dice, market stepped right in front of me on all of them.

    i still think i can get these spreads on for .15, .20 tops.

    whistlingleaf, thx, i liked the idea of the upside call spreads on FXE. i was looking at the chain, and the SEP 140s alone in the .15-.17 range that would smooth the pain on my wee NOV EUO spreads enough for me for now, if a quick/massive squeeze were to materialize somewhere along this slow death spiral march.

    who knows though, that great 'bank run' on euro might be turn out to be rally from $1.15/$1.18 to touch $1.25, for the last time ever. so i might be adding to that 'cheap' spike protection even cheaper down the road, but i wont mind at that point.

    (if only i can get my damn fills at mid sometime this week! i refuse to pay the b/a spread,.. twice,.. just to get on a spread this small, paying .25 for something that is wavering between .15/.20 mid/mark for two days.)

    i've an idea,.. any nickel picker upper credit spread writers in the house tonight? want to take the other side of my cheap ass spreads, c'mon, i'm a sucker, look at my crazy name, i'm basically *giving* you 15 cents, to keep forever! ... 17.5?

    good luck to all!