• Market:  March 2006 US Dollar Index (DXH6)
• Tick value: 1 point = $10.00 
• Option Expiration: 03/03/06   
• Trade Description: Bear Put Spread
• Max Risk: $400.00
• Max Profit:  $1600.00
• Risk Reward ratio 4:1

Buy one March 2006 US Dollar Index 88 put, and sell one March US Dollar Index 86 put, for a combined cost and risk of 40 points ($400.00) or less to open a position.

Technical/Fundamental Explanation
The US Dollar Index remains the engine that drives many of the other markets that we trade. This engine is showing signs of breaking down. With the prospect of the Fed. stopping or at the very least slowing the pace of the rate hikes we had seen in 2005, the Dollar is losing it's number one and perhaps only reason for moving higher. Being bearish the Dollar is not unpatriotic as I have heard some people say lately. In fact, as I have mentioned in the past, the US has more of a vested interest in a weaker Dollar than almost anyone else. This is clearly the only way the US will ever get back to something that resembles balance. While current political guru's try and tell us that debt is good, lets get real. Think about it, does having $10,000 in credit card debt help you out in any way? Of course not. Now imagine you had $8,170,647,535,149 in debt, (and yes that is 8 Trillion!) that is the current amout of debt the US is in! And the number increases by 2.28 billion per day! If the US government was held to business standards, they would be filing chapter 11 and at the same making the Enron scandal look like a warm up. This trade is simply trying to put on a near the money put spread for as little risk as we can.

Profit Goal
Max profit assuming a 40 point fill is 160 points ($1600.00) giving this trade a 4:1 risk reward ratio. Max profit occurs at expiration with the US Dollar index trading anywhere below 86.00. The trade is profitable at expiration if the US Dollar Index is trading any where below 87.60(break even point).

Risk Analysis
Max risk assuming a 40 point fill is ($400.00). This occurs at expiration with the US Dollar Index above 88.00.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.

Matt Odom is the Managing Partner and Energy Analyst and Derek Frey is Head Trader at Odom & Frey Futures & Options.