Markets

Protection in play after rally in the euro

The euro has enjoyed a nice run, but one investor still wants protection.

optionMONSTER's Depth Charge tracking system detected a three-way put trade on the CurrencyShares Euro Trust ( FXE ) exchange-traded fund, which tracks the common currency against the U.S. dollar.

A block of 2,500 March 137 puts were sold for $0.80, while equal amounts of April 137 puts were bought for $1.70 and April 134 puts were sold for $0.78. The net cost of the transaction was $0.12.

Volume was below open interest in the March contracts, but not April. That suggests the investor rolled a position from the simple puts to a new bearish put spread the following month. He or she stands to collect $3 if the FXE closes at or below $134 on expiration.

The fund, which represents 100 euros, rose 1.77 percent to $138.21 in morning trading and is up 3 percent since mid-February. It has been climbing as investors speculate that the European Central Bank will raise interest rates to combat inflation, while the U.S. Federal Reserve is expected to keep rates low. That increases the appeal of owning euros and adds fuel to the so-called carry trade.

The transaction accounts for almost all the FXE's option volume so far today, according to the Depth Charge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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