• Market:  May 2006 Euro Currency (ECK6) *May options trade based on the June futures price.
• Tick value: 1 point = $12.50 
• Option Expiration: 05/05/06   
• Trade Description: Bull Call Ladder Spread
• Max Risk: $275
• Max Profit:  $975
• Risk Reward ratio 3.5:1

Buy one May 2006 Euro Currency 123 call, also buy one May Euro Currency 126 call, while selling one May Euro Currency 124 call, and sell one May Euro Currency 125 call. For a combined cost and risk of 22 points ($275) or less to open a position.

Technical / Fundamental Explanation
I continue to be bullish this market and recommend banking the profits from the April spread we exited today and at the same time rolling our original investment from the April trade right back into this May trade. With the FOMC (Federal Open Market Committee) nearing the end to the rate hiking cycle, the Dollar has little left to keep it propped up. Not to mention the fact that no one has more of a vested interest in a weak dollar than the US itself. A weak dollar is about the only way we will be able to deflate our way out of debt and at the same time at least try and compete with China. Turning to technicals one can see that we have clearly turned higher and reversed the downtrend. Most economists agree that the Dollars days are numbered and we are likely to see some rather large moves in currencies against the Dollar for the rest of this year. All in all this is a very low Dollar way to be long a near the money call for then next month while getting better than 3 to 1 on your money and having over a 250 point profit range.

Profit Goal
Max profit assuming a 22 point fill is 78 points ($975) giving this trade a 3.5:1 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 123.22 and 125.78 (break even points) which means we have a band of 256 points in Euro Currency that we can profit in.

Risk Analysis
Max risk assuming a 22 point fill is $275. This occurs at expiration with the Euro Currency trading below 123 or above 126.

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

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.