• Market:  March 2006 Euro Currency (ECH6)
• Tick value: 1 point = $12.50 
• Option Expiration: 03/03/06   
• Trade Description: Bull Call Ladder Spread
• Max Risk: $250
• Max Profit:  $1000
• Risk Reward ratio 4:1

Buy one March 2006 Euro Currency 123 call, sell one March Euro Currency 124 call, sell one March Euro Currency 125 call, and buy one March Euro Currency 126 call. For a combined cost and risk of 20 points ($250) or less to open a position.

Technical/Fundamental Explanation
Just like last month, we are rolling the Feb. Euro trade into this March Euro trade. I continue to be bullish this market, the recent strength in the dollar is short term and will subside by then end of this week. Look for Tuesday's FOMC meeting to be the turning point. Recent comments from the ECB indicate that they are beginning a tightening cycle of there own, while we are slowing or even stopping our tightening on this side of the pond. Fundamentals would argue that the Euro has no choice but to move higher against the Dollar if rates are rising in Europe and not here in the US. Technically this market has not broken down the bullish setups we have seen now over the past 60 days or so. In fact, the recent pullback is a confirming indicator that the Euro is on a general bull trend. All in all this is a very low dollar way to be long a near the money call for then next month while getting 4 to 1 on your money.

Profit Goal
Max profit assuming a 20 point fill is 80 points ($1000) giving this trade a 4:1 risk reward ratio. Max profit occurs at expiration with Euro Currency trading between 124 and 125. The trade is profitable at expiration if the Euro Currency is trading any where between 123.20 and 125.80 (break even points) which means we have a band of 260 points in Euro Currency that we can profit in.

Risk Analysis
Max risk assuming a 20 point fill is $250. This occurs at expiration with the Euro Currency trading below 123 or above 126.

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.