• Market:  January 2007 Euro Currency (ECH7)** Jan. Options trade based on the March futures contract.
• Tick value: 1 point = $12.50
• Option Expiration: 01/05/07   
• Trade Description: Bull call ladder spread
• Max Risk: $250
• Max Profit: $1000
• Risk reward ratio:  4:1

Buy one January 2007 Euro Currency 133 call and at the same time, buy one January 2007 Euro Currency 136 call, while selling one January 2007 Euro Currency 134 call and sell one January 2007 135 call for a combined cost and risk of 20 points ($250) or less to open a position.

Technical / Fundamental Explanation
The Euro Currency has really taken off against the Dollar in recent weeks. In the past few days, the Euro has the pulled back a bit while still maintaining the overall bull trend. We are using this trade to go long an at the money call that gives us a very attractive band of profitability of 260 points. We also have a very strong seasonal trend that peaks out at our exact expiration date of January 5th. This trade is short term because we do not need or want a large move, we are simply trying to take advantage of a pullback from the highs and then look to retest those highs.

Profit Goal
Max profit, assuming a 20 point fill, is 80 points ($1000) and occurs with March 2007 Euro Currency trading anywhere between 134.00 and 135.00 at expiration. Break even points are 133.20 and 135.80 which means we have a band of 260 points in which the Euro can trade, for this trade to be profitable.

Risk Analysis
Max risk, before commissions and fees, and assuming a 20 point fill, is $250. This occurs at expiration with the March 2007 Euro Currency trading below 133.00 or above 136.00.

Derek Frey is Head Trader at Odom & Frey Futures & Options.

Risk 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.