Inverse Currency Pair Straddles

#1

Had a trading plan and was wondering if anybody can give me some feedback please. Using the daily binaries…buy a contract @40 on the eur/usd and buy a contract on the usd/chf@40… then sell a contract @60 on the eur/usd and sell a contract on the usd/chf @60. These are inverse currency pairs and they will move in opposite directions, therefore one side has to make money. Because we don’t know which way the move will be and especially because we don’t know how big it will be, we will definitely be right bigtime, either with the buys or sells. However, the cornerstone to this trade is to monitor the trade at least sometime before expiration. Because this is a very tight straddle, the prices will be volatile if there is no clear direction and prices are near center. However some volatility should be expected and closing trades before expiration should mitigate much of the loss if there is one.

#2

Hi, what you’re talking about is what we call synthetic currency pairs here (other places may have a different name for them). Here in the forum, just go up to the magnifying glass, click it and type the word “synthetic” into the search box. There are many posts, articles, and webinars on the subject. They explain them, instruct how to put them together, how to trade them, and when to trade them for higher probabilities of success.

There was a excellent series of articles done by Darrell on the subject at the beginning of the year. Here is the link to it on Benzinga: [Synthetic Spreads: Introduction to the Series][1]
#3

It is important to note that inversion is not a constant even throughout the day it can easily vary. Both sides can go the opposite direction between entry and expiration and so you could lose on both easily.