• Market:  December 2006 Euro Dollar (EDZ6)
• Tick value: 1 point = $25
• Option Expiration: 12/18/06   
• Trade Description: Straddle
• Max Risk: $350
• Max Profit:  Unlimited

Buy one December 2006 Eurodollar 94.62 put and call at the same time for a combined cost and risk of 14 points ($350) or less to open a position.

Technical / Fundamental Explanation
Our last Eurodollar trade worked out quite well. That trade was a strangle and we made our money on the call side. We have no clue which direction the Eurodollar will go, but with this trade design we don't have to! We are straddling the market which means we are buying a call and a put of the same strike price. So all we want is the market to continue to move. It makes no difference which direction it goes as long as it goes somewhere. The real risk here is if the market flat lines for a while but that is not very likely give all the uncertainty surrounding inflation and futures FOMC interest rate policies. This is a simple low cost trade that allows us to profit without having to call or even be correct in the overall direction of this market.

Profit Goal
Max profit assuming a 14 point fill is unlimited.

Risk Analysis
Max risk assuming a 14 point fill is $350. This occurs at expiration with Eurodollars trading at exactly 94.62.

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.