Closing the Gap - Futures Edition

Sterling: How Low Can it Go?

| Jul 22, 2016
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    Closing the Gap - Futures Edition

    Sterling: How Low Can it Go?

    Jul 22, 2016

    The citizens of the United Kingdom, on June 23, 2016, surprised many when they voted in favor of leaving the European Union, The “yes” vote on “Brexit”, as it was called, led to sharp sell-offs in global stock markets which fairly quickly recovered. The Euro (/6E) sold off and the British Pound (/6B) sold off harder, down about 15%. The currencies have not experienced the recovery that has been seen in stocks. When markets move big there is usually an opportunity. Pete Mulmat, our Futures expert, joins the guys to discuss these currency markets and shares a trade idea you may want to put to use.

    Pete laid out both the fundamental news influencing the currencies and provided a look into the technical picture as well. Both the British Pound and Euro declined on fear. The fear over the Pound was how the British economy would be impacted by “Brexit”. The fear over the Euro was based upon concerns that more countries would follow the British and might seek to leave the European Union. The Euro/GBP spot price is near a two year high, although demand for the Euro itself is weak due to negative yields far out the curve in some Euro countries.

    Pete laid out his trade buying the Pound and selling the Euro. He used the CME futures, /6E and /6B, to do so. This Pairs Trade eliminates the dollar component. A table included key information including the Delta, Implied Volatility (IV), notional value and margin. It’s an expensive trade since there is no margin break. Pete praised Dr. Data and our Research Team for providing a helpful chart that displayed P/L 10-day moves in the spread. There were several large moves, including one of about $9000. Because of that and the large margin Pete mentioned that the micro FX contracts (/M6E & /M6B) might be a better choice for some traders. Pete said that liquidity was excellent in these micro-Futures too.

    Watch this segment of Closing the Gap - Futures Edition with Tom Sosnoff, Tony Battista and "precious" Pete Mulmat for an examination of the Euro/British Pound cross, what’s moving it, how to play it and how even some smaller traders can get involved using Micro Futures.

    This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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