Trading EURUSD via FX Option Strategies Trading EURUSD via FX Option Strategies Trading EURUSD via FX Option Strategies

Trading EURUSD via FX Option Strategies

Options 10 minutes to read
Hay Thi

Market Specialist

Background

EURUSD has been on the backfoot in recent weeks due to French election risks and dovish market sentiments following the ECB’s recent rate cut. In the first round of the French legislative elections, Marine Le Pen’s National Rally secured 34% of the votes that saw a kneejerk reaction from the EUR, causing EURUSD to rally above 1.0750 in relief as the market was expecting a higher vote share. However, ongoing political uncertainty implies heightened volatility, and it may continue to limit EUR’s upside potential in the medium term. The upcoming second round of French election on July 7 is expected to be the major driver of the movements in EURUSD in the near term.

Our Head of FX Strategy thinks:

EURUSD could experience a relief rally if the risks associated with the French election are priced out. However, even if the Federal Reserve adopts a more dovish stance in Q3, the euro will likely remain at a yield disadvantage compared to the US dollar. Additionally, risks from the US presidential election could impact the EUR, with any moves above 1.09 likely attracting sellers.

Option inspiration for EURUSD bears

Buy Put/Sell Call for 1 month

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 1 month (01-Aug-2024)
  • Premium for Sell Call at 1.0830: 0.00342
  • Premium for Buy Put at 1.0630: 0.00342
  • Net cost ~ 0

Buy Put/Sell Put/Sell Call for 1 month

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 1 month (01-Aug-2024)
  • Premium for Buy Put at 1.0700 : 0.00543
  • Premium for Sell Put at 1.0560 : 0.00162
  • Premium for Sell Call at 1.0820 : 0.00381
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 1 month for a notional value of EUR 100k

Buy Put/Sell Call for 3 months

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 3 months (03-Oct-2024)
  • Premium for Sell Call at 1.0825: 0.00989
  • Premium for Buy Put at 1.0710: 0.00989
  • Net cost ~ 0

Buy Put/Sell Put/Sell Call for 3 months

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 3 months (03-Oct-2024)
  • Premium for Buy Put at 1.0725: 0.01043
  • Premium for Sell Put at 1.0530: 0.00431
  • Premium for Sell Call at 1.0920: 0.00612
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 3 months for a notional value of EUR 100k

Options inspiration for EURUSD bulls

Buy Call/Sell Put for 1 month

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 1 month (01-Aug-2024)
  • Premium for Buy Call at 1.0860: 0.00308
  • Premium for Sell Put at 1.0635: 0.00308
  • Net cost ~ 0

Buy Call/Sell Call/Sell Put for 1 month

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 1 month (01-Aug-2024)
  • Premium for Buy Call at 1.0755: 0.00687
  • Premium for Sell Call at 1.0845: 0.00283
  • Premium for Sell Put at 1.0665: 0.00404
  • Net cost ~ 0 USD

Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 1 month for a notional value of EUR 100k

Buy Call/Sell Put for 3 months

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 3 months (03-Oct-2024)
  • Premium for Buy Call at 1.0915: 0.00685
  • Premium for Sell Put at 1.0635: 0.00685
  • Net cost ~ 0

Buy Call/Sell Call/Sell Put for 3 months

  • Spot Reference: 1.0735
  • Notional value: 100,000
  • Expiry date: 3 months (03-Oct-2024)
  • Premium for Buy Call at 1.0735: 0.01529
  • Premium for Sell Call at 1.0855: 0.00872
  • Premium for Sell Put at 1.0625: 0.00647
  • Net cost ~ 0

Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 3 months for a notional value of EUR 100K


Important disclaimer: The impact of swaps is not taken into consideration in the scenario above. The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and consider their unique financial situation, risk tolerance, and investment objectives before making any decisions. 

Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks. In Saxo Capital Markets Risk Warning, you will find more information on leveraged products and the associated risks. Trading in financial instruments carries risk and may not be suitable for you. Please refer to Saxo Capital Markets’ full Disclaimer here.

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