NY Expo Case Study. CurrencyShares Euro Trust (FXE) is down 93 cents to $136.59 after the euro lost .0104 to 1.3687 against the buck. In the options market, one player appears to be bracing for additional short-term weakness in the European currency. They paid 15 cents for the Feb 135 – 136 – 137 put fly, 10000X. Looks like a new position and, since Monday is a holiday, a bet that FXE will drift towards $136 over the next 7 trading sessions (including today.) Here, the strategist wants the fund to edge lower during that time and for time decay to eat away at the Feb 136 puts. The Feb 137s could see modest appreciation and the 135s are bought as a hedge. If the trade works out, the 135s expire worthless.



It’s a relatively cheap fly, at only 15 cents (25 cents at current price) and offers a possible 85 cent pay-off (excluding commissions) if the fund drifts down to $136 per share by next Saturday’s expiration. The risk is the debit, or 15 cents (+ commissions). If the fund closes above $137 or dips below $135, the entire debit is at risk. The breakevens are $135.15 and $136.85. If FXE moves within that range, the fly will make money.