This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Jared Woodard Trade: Australian Dollar Futures

The Reserve Bank of Australia left its benchmark interest rate unchanged on Tuesday. The bank said that the Australian dollar is "still uncomfortably high," though, keeping in place the verbal pressure that has characterized the bank's approach in recent months. The market responded to the news by taking AUDUSD higher: December futures traded at the CME were up 0.5% in late afternoon trading.

The sharp decline from $1.05 this year has provided some relief to the economy, and most bank strategists see more downside to come for 2014. In the short term, the best approach is to position for a pause and collect some premium while waiting for the next catalyst to move the currency lower. Option implied volatility here is at two-month highs after moving sharply higher in the last couple weeks.

This trade sells short-term puts to partially finance the purchase of longer-dated puts. It will profit if the volatility term structure of AUD volatility steepens, since the short January puts will lose value more quickly than the long March puts. If the trade works out nicely, we may be able to sell or roll to February options as well.

Trades: Buy to open 6AH4 (March) 0.91 puts for $0.0193 and sell to open 6AF4 (January) 0.90 puts at $0.0068.

Equity-only investors can put on a similar position using the CurrencyShares Australian Dollar Trust (FXA), multiplying the strike prices by 100.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Jared can be followed on Twitter at twitter.com/CondorOptions

At the time of publication, Jared Woodard held positions in 6A.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FXE $107.16 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters