FxWirePro: Trade US NFP using USD/CAD covered straddles

Today's US key data (Unemployment claims) release for June has been flashed at 5.3% which is almost in line with streets' expectation at 5.4% but little poor. But we reckon this as not a drastic market mover for loonie as long as there is no important news out of Greece, the market is likely to at least temporarily focus on fundamentals.

Whiel Non Form payrolls for june is printed at 223K which is slightly below forecast numbers at 230K. We estimated that non-farm payrolls to increase 230,000 in June driven by gains in service sector employment and construction.

However, we think this should not be a major driving force for loonies' gains against dollar. Even if CAD may have seen a little buying interest and derived some returns due to below expected NFP data, it would be unsustainable. We look at very good buying opportunity using these dips as an optimal entry points around 1.2605 levels or even below these levels.

Currency Derivative Trading Call: USD/CAD

The covered straddle at this juncture would derive around 30-40 pips in short run.

This bullish strategy that involves the simultaneous selling of equal number of ATM puts and ATM calls of the USD/CAD, while holding equivalent amount of the spot FX outrights.

Note that only the call options are covered. Thus, short 7D ATM calls and 7D ATM puts with positive theta values.