A few weeks ago we were anticipating a move higher in the USD/CAD.  We had a target of 1.03000-1.04000 and looked at using USX calls as a means of participating.  While the pair hit 1.03000, there wasn’t quite the follow through we anticipated as the USD lost significant ground against most of the majors. 

With the USD now back down testing the the par level against the Canadian dollar, this might be an intresting time to consider writing some put options on the USD. 

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As a put writer, you are selling a put option with the expectation that the underlying security will remain at or above the written strike price. This is an income generating strategy that takes advantage of selling volatility and capitilizing on time depreciation.  It is important to note that you will have to meet certain margin requirements and that this strategy is not permitted in your registered accounts.    

If you believe that USD/CAD par (1.00000) is a solid support level, you can sell USX puts at or below the 100 strike price to collect a credit.  We typically select a near-term expiration month to capitalize on an accelerated rate of time depreciation.  In this example, January 100 strike puts could be sold.  As long as the USD/CAD is above par at noon on January 15th, the puts expire and you keep the credit

Remember, multiply the spot market rate by 100 to interpret USX strike prices.

ex. USD/CAD   = 1.00500 
     USX Strike = 100.50

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Until next time!

J.