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Foreign exchange market

Options: Introduction To Trading Horizontal Spreads On Seasonality

Options: Introduction To Trading Horizontal Spreads On Seasonality

 

 

In the previous article we told you about the idea of trading options on commodity futures with the help of calendar strategies. In brief, commodity futures are influenced by seasonal factors.
 

 

 

 

 

 

However, using calendar spreads in futures trading is attended with the same unpleasant issues like the necessity to trade the given asset directly, with placing stop-loss orders etc.
 
Fortunately, we came up with the idea of trading options instead of futures. Indeed, trading options with the help of calendar strategies is another story as compared to futures spreads. Moreover, some positive factors connected with seasonality can be inherited by option trading strategies, i.e. seasonal appreciation of one contract against the other, which gives option spreads another competitive edge. Once the seasonal factors fail, we are defended by time decay, which is profitable in this case.
 
So, last time we (the Option Trading Department of Masterforex-V Academy) traded corn: a June option was sold while an August option was bought.
 
Let’s monitor the trade. The plan hasn’t worked so far as the seasonal downtrend is delayed (it should have started in early March).

 

 

 

 

The chart above indicates that the spread price has gone 10 points (or $500) up from the entry level.   Now let’s have a look at the riskrofile of our calendar spread (it consists of 4 sold and 4 purchased options):

 

 

 

 

 The paper loss is $200. Why is it a paper loss? If the price stays at this point at expiration, we will get some $2000 as a reward. If the seasonality does work, we will earn extra money.

 

 

 

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FBS Launches Auto Cup Promo!

 

FBS can be considered one of such young but promising Forex broker that are always focused on the client. Being an international broking company rendering world-class investment and trading services to retail traders and investors from all around the globe, FBS positions itself as an STP and ECN broker, FBS is actually capable of providing its clients with an impressively wide range of financial products and services within the framework of a truly competitive environment.

Publication date: 30 October 09:53 AM

TurboForex Offers Forex Traders Trade on Stocks of “Blown up” Exchange

 

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Publication date: 29 October 06:43 PM

Forex: Dollar Goes Down As Investors Wait For FOMC Meeting Results

 

Today, on October 29th, the US Dollar is still going down against other currencies, including a currency basket of 6 other majors. Since the beginning of today’s trading session, the USD index has already dropped some 0,08%. The decline is taking place as traders and investors are looking forward to the results of the Fed’s FOMC meeting, which is to end today.

Publication date: 29 October 05:11 AM

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Publication date: 28 October 07:07 PM

USD Index Trading Close To 85,55 While We Wait For FOMC Meeting

 

Today, on October 28th, the US Dollar index is trading almost at the same level it started the trading day from – 85,55. Investors are probably unwilling to open new trades in advance of the FOMC meeting. They want more clarity from the Fed regarding the central bank’s QE3 tapering decision along with some other major events scheduled for the week.

Publication date: 28 October 07:44 AM

Forex. USDJPY: Dollar Consolidates Close to 107,8 Against Yen

 

Today, on October 28th, the USDJPY exchange rate keeps on trading inside a narrow price range. The price is consolidating close to 107,8 as traders and investors are looking forward to the Fed and BOJ meetings.

Publication date: 28 October 06:24 AM

Forex: EURUSD

 

25 banks of the Eurozone failed the stress tests implemented by the European Central Bank. The tests were aimed at checking the banks’ financial stability and resilience in case another major crisis breaks out. According to the ECB’s report made on Sunday, the total shortage of capital was amounted to 24,62bn euros, which is currently equivalent to 31,17bn dollars.

Publication date: 27 October 07:40 AM

PAMM Indices by Forex Trend: Some 160% ROI In 2 Years

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Publication date: 27 October 07:36 AM

FBS Gives Away iPhone 6 Devices

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Publication date: 27 October 06:45 AM

EURUSD: Euro Gains Value Dollar After ECB’s Stress Tests

 

25 banks of the Eurozone failed the stress tests implemented by the European Central Bank. The tests were aimed at checking the banks’ financial stability and resilience in case another major crisis breaks out. According to the ECB’s report made on Sunday, the total shortage of capital was amounted to 24,62bn euros, which is currently equivalent to 31,17bn dollars.

Publication date: 27 October 06:35 AM