UPDATE: My Disaprity on Austerity and a Low Premium Way to Short the Euro w/ FXE

by Dan June 29, 2011 7:30 am • Commentary

I Bought the structure below when the FXE was at almost the exact same spot last week……in that time period it looked like the Euro was going to break down against the dollar and traded as low as 141…..

This Put Fly is now worth more than the .16 that I paid for it and I want to stick with it as I feel once we get by today’s austerity vote in Greece we will likely see more volatility as we head into the summer around some of the other beleaguered economies in Europe……..this with the potential for earnings out of NKE in the U.S. could cause a little flight to quality in the dollar.


FXE: The Euro vs the Dollar has been trading very technically of late and in some ways like a yo-yo between weakness related to sovereign debt issues in Europe and the potential for a weaker second half and end to stimulus over here….. [private]

I am not anything near an expert when it comes to macro issues, and certainly not currencies…but with tonight’s confidence vote in Greece and the potential for austerity measures not to pass next week I want to make a low premium bet that the Euro comes back in to test the 140 level and ultimately hits its 200 day moving average by July expiration.

[caption id="attachment_2838" align="aligncenter" width="300" caption="1 yr FXE chart provided by "][/caption]

I want to express this view in the FXE, the etf set to track the performance of the Euro vs the USD.

TRADE; FXE ($143.30) BUY the July 140/138/136 Put Fly for .20

-Buy 1 July 140 Put for .95

-Sell 2 July 138 Puts at 1.10 (.55 each)

-Buy 1 July 136 Put for .35

Break-Even on July Expiration:

Btwn 140 and 139.80 lose up to .20,

Btwn 139.80 and 138 make up to 1.80

Best Case at 138 make full 1.80 or 10x you rmoney

Btwn 138 and 136 the pay-out trails off and

136 or below lose .20

DISCLOSURE: I am bidding and getting hit, paying .16.