Saxo Group Videos

#SaxoStrats: Options for EURUSD ahead of US NFPs

Spot trading EURUSD is very difficult after the recent hard squeeze on short positions and ahead of the US nonfarm payrolls data, says Saxo Bank’s John Hardy. It is equally challenging to choose stop levels when volatility is high.

That high volatility also makes options rather expensive, but if US data surprises to the upside on Friday’s US employment report, EURUSD could suddenly find itself well back in the old range and pushing toward the range lows below 1.0500 in a compressed time frame. If not, of course, the option buyer risks losing all of the premium paid for the option.

Management and risk description

Parameters

Entry: Long a May 19, 1.0950 EURUSD put, for around 70 pips (spot ref. 1.1100).

Key risks: Weak US data or a further squeeze on heavy short euro positioning which inspired the recent rally.

Time horizon: Up to option expiry, or before if the options is well in the money (for example below 1.0800) before then.

01:17 minutes
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