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Going forward, politics is still a question mark and could be a stimulus for a major correction down the road. But one area where I am willing to place a long-term bullish bet is in currencies.
The U.S. dollar is still very strong, although that is a very overcrowded trade with too many bulls. On the other hand, the bears are dominating trading in the euro, so I’m looking to Guggenheim CurrencyShares Euro Trust (NYSEARCA:FXE) for a contrarian play. Here’s my recommendation for an FXE call debit spread:
Using a spread order, buy to open the FXE Jan. 2018 $108 call and sell to open the FXE Jan. 2018 $112 call for a net debit of about $1.00.
A debit spread is simply a way to lower the cost of buying options, as the option that you sell to open (short) helps offset the cost of the option that you buy to open. Therefore, this call debit spread is a way to lower the cost of buying bullish call options. Many brokers will require the use of margin and/or a set amount of reserved capital to execute a debit spread; contact your broker directly for specific requirements.
Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.