• Market:  August 2006 Euro Currency (ECU6) *Aug. Options trade based on the September futures price.
• Tick value: 1 point = $12.50 
• Option Expiration: 08/04/06   
• Trade Description: Bull call Ladder Spread
• Max Risk: $250
• Max Profit:  $1000
• Risk Reward ratio 4:1

Buy one August 2006 Euro Currency 130 call, also buy one August Euro Currency 133 call, while selling one August Euro Currency 131 call, and sell one August Euro Currency 132 call. For a combined cost and risk of 20 points ($250) or less to open a position.

Technical / Fundamental Explanation
We just exited our July Euro put spread for a little more than a 100% return in 30 days. As I mentioned in the July spread I remain a longer term bull of this market. The Euro continues to gains strength and I see an upside break out coming later this month and this trade is positioning us for exactly that.This has been our single best trade so far this year and as usual I recommend banking the profits from the July trade we exited today and reinvesting the original capital from it back into this August spread.

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 131 and 132. The trade is profitable at expiration if the Euro Currency is trading any where between 130.20 and 132.80 (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 $300. This occurs at expiration with the Euro Currency trading below 130 or above 133.

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.