Worried about the value of your greenbacks? A simple option trade can support your buying power.
FXE is the ticker symbol for the currencyshares Euro Trust. This vehicle trades just like a stock and is designed to track the value of the Euro. Since the Euro and the US dollar move inversely to one another, you can hedge the dollar with options on the Euro. Below are a few examples.
1. Buy an FXE call option. If the dollar sinks, the call option should appreciate. Conversely, if the dollar ascends, the FXE call will lose, but not more than the premium paid. Therefore, no matter how strong the dollar gets, the FXE call will have limited exposure.
2. Buy a bull call vertical on the FXE. This means buying a call option at one strike, and selling another call option at a higher strike (both options have the same expiration month.) If the dollar falls, these verticals should profit.
3. Buy a straddle on the FXE. If the Euro ascends substantially, some hedging profits can result. If the Euro tanks, some additional profits on top of the stronger dollar could manifest.
There are more and more vehicles available these days, many of which are making the task of navigating the financial markets easier. If you keep your eyes open and your mental wheels spinning, you'll find many ways to manage your money more effectively.
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This is not a solicitation or recommendation to buy any securities, options or financial instruments of any type. Any information in this email is for educational purposes only.
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