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I am thinking about shorting Eurodollars with put options. I have two questions:
1-I was thinking about going a year out with my puts. I would keep getting puts in the next month as the current one I was buying in goes under 365 days until expiration. Example: I would be getting Jun 18 puts until they go under the 365 day mark. At that point I would start to acquire puts in Sep 18. Eurodollars are trading out as far as Mar 21. Is my time period of a year too narrow? Too close and the options would expire very quickly. Too far out and the options might not move very much at all for a long period of time.
2-What (if any) problems would I run into when I attempted to liquidate the options in the example above?
Please ask if you need more information.
Thanks in advance for your time.
Eddie
Can you help answer these questions from other members on NexusFi?
You need to ask yourself, by how much do you see the asset (in this case euro/dollar) move and in what time frame.
There are many different strategies one can then consequently think of.
Buy the put and keep it
Sell a naked call
Sell a covered call
an many more combinations..
A far in the future OTM put is all time value you pay, if nothing happens, you loose your money
it well melt slowly down to zero. Even if the Euro/Dollar drops slowly and not below your strike.
For the moment let's assume options I had were at a level that I wanted to liquidated them. If I owned them a year out do you know of any potential pitfalls I'd run into with getting rid of them? Will the market that far out be hard for me to get out of?
You will always be able to get rid of them, there may be a liquidity problem, or the price may be not what you
want it to be, but it's not that you will not be able to liquidate..
Not being able to get rid of them was my real concern. Not being able to get the price I want is an issue with any trade. But as long I will be able to liquidate them I'll deal with it.