How to Make Money on Volatile Currencies

Certainly investors have taken notice of the wild swings in the currency markets in recent weeks. Clearly, this is one of the reasons for gold's strength, even in the face of a stronger dollar. People are simply losing faith in fiat currencies.

The euro is a prime example of the type of currency volatility we have seen recently. Just back in December, the euro was trading over the 1.50 mark vs. the greenback. Due to sovereign debt issues (think Greece) the euro has slid steadily and rapidly to trade currently around 1.36 vs. the dollar. Many investors are left wondering if the selling is beginning to subside, and although it may be temporary, the outlook for the euro is bleak.

Let's face it, even if Greece is "bailed out" and given the help it needs to get its debt under control, Spain, Portugal and numerous other countries are standing right behind it in line. Bottom line is the euro zone debt problem is not going to go away anytime soon.

Furthermore, the EU crisis calls for "loose" monetary policy, and leaders will keep rates extremely low in order to not choke off the fragile economies, even if it means sacrificing euro strength in the process. Here is how to take advantage of this scenario moving forward.

Although I typically like to sell calls and puts, in this case, the downside danger is too great. Therefore, we will focus on call-selling and shorting futures contracts. Given the fact that the euro has tumbled quite far quite quickly, a good position will require a little patience.