Trade Alert: FXY

Buy to open the CurrencyShares Japanese Yen Trust (FXY) July 21, 2017 $90 call option. Pay no more than 55 cents per contract.

This is not an indicator-driven trade as we do not have a yen indicator, at least not yet. This is a hedge against our open December 15, 2017 $23 put option trade against the VanEck Vectors Gold Miners ETF (GDX).

They don’t always follow each other, but over the past three months gold and the yen have tracked themselves quite closely (see chart).

Concerns over investigations surrounding President Trump and his allies have sparked some flight to safety in precious metals. However, our gold stock indicator is still bearish and warrants us staying with the GDX put despite today’s gold and miners rally.

We think opening a call on the yen to hedge against the GDX put makes sense at this point. The shorter-dated FXY call, given the close correlation between gold and yen at this time, will give us a chance to offset potential paper loss in the GDX put if gold and gold stocks continue to exhibit strength.

This could be only a two or three day trade, perhaps even shorter. Stay tuned.
This trade is rated high risk as it could expire worthless if our expectations are not met.  

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