I am back to covering the December contract until the December Options expire, considering that if the euro breaks out to the upside now, it could wake up our ratio call spread.
The December Euro is up 137 ticks at 1.4992 this morning as I write. The enclosed chart shows that the euro, once again, challenged its 40 day moving average that has been support for this market over the past several months. The test held and now is reversing prices back up towards the recent contract highs in the 1.5050 area. I still expect those highs to eventually come out and see prices challenge the all time highs at 1.6000. We still own our December 1.58/1.60 ratio call spread that we will continue to hold on to. On Friday we put on a March 1.385/1.340 ratio put spread for an overall credit of 13 ticks or a gross credit of $162.50.
The directional movement indicators, which have been wavering back and forth from bullish to bearish and back again, are poised to cross back to the bullish side. The ADX line continues to drop suggesting that there is no strong trending market, yet. My longer term trend indicators are all bullish on the euro.
Followers of this letter should also be long one December Euro (158.00 strike) call option from 32 ticks and short 2 December Euro (160.00 strike) call options from 20 ticks each for a combined credit of 8 ticks or $100 gross. Option expiration is in 11 days.
Followers should also be long one March Euro (1.3850 strike) put from 121 ticks and short 2 March Euro (1.3400 strike) put options from 67 ticks each for an overall credit of 13 ticks or $162.50 gross.
David Hall
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