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Foreign Exchange: A Market by Christopher Nolan

by | Tips & Strategies

Entering the foreign exchange market is like watching a *Christopher Nolan movie for the first time. What’s the timeline here? How does this development affect the other plot lines? Is Leonardo Dicaprio’s character even alive? It can be difficult to make heads or tails of how these two universes’ innerworkings actually affect each other.

Starting with the US dollar can help to reduce complexity for many new traders, especially when looking at Small US Dollar (SFX) futures that are diversified against seven foreign currencies (including euro, Chinese renminbi, Japanese yen, and more). One character. One narrative.

No Dream Within A Dream (Small US Dollar SFX)

Small US Dollar - 2021/01/29
Source: dxFeed Index Services (https://indexit.dxfeed.com)

The reviews are in for the US dollar: bearish. USD has been panned by almost every currency in the world as it sits at lows unseen since 2018. Picking up a long position in SFX poses potential opportunity if the market were to bounce off this downside extreme, not to mention the hedge it could pose for those holding commodities such as gold, oil, or corn that are priced in US dollars.

Without adding too many levels to your trade, the fact that cheaper dollars often translate to more expensive assets means that buying those cheap dollars can hedge against the potential for asset prices to fall.

If hedging isn’t your speed, new pairs trading opportunities could await the trader that’s willing to add a few more characters to the cast.

 

Selling Commodity Puts with +1 SFX Future (March Options)
 Silver (SLV) Crude Oil (USO)
-2 21 Puts -1 31 Put

Foreign exchange might look daunting at first blush, but you can quickly turn it into a choose-your-own-adventure movie thanks to simple products like Small US Dollar (SFX) futures.

*Christopher Nolan did not write, direct, or produce foreign exchange markets.

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© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

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