Forex Investment and Currency Trading

Economic uncertainty in the Euro bloc has led to a weaker perception of the EUR in the current market. At the same time, the stable equity markets have led to a positive environment for carry currencies, with the AUD dollar leading the views. The fundamental view has projected lower EURAUD rates going forward.

EURAUD forecast for 2008:
Spot 1.6900
Q2 1.6300
Q3 1.5500
Q4 1.5400
Risk /Reward trades

Options enable the end user to take on attractive risk reward trades while limiting their downside in the event the forecasted rates do not prove correct. Further, option spreads utilize a sold option combination
to reduce the premium outlay, while limiting the extreme upside on the trade. The following EUR/AUD spread takes advantage of these views.

8M EUR Put/AUD Call Spread
Buy a 1.6450 strike in 1 unit
Sell a 1.5250 strike in 3 units
Buy a 1.4650 strike in 2 units
Net Cost is 0.785% of EUR notional

This strategy allows for a maximum gain at 1.5250 on the expiry date.