The dollar was lingering to get held up after the U.S. Department of Labor reported on yesterday that the number of individuals filing for initial jobless benefits in the week ending May 2 rose by 3,000 to 265,000 from the previous week’s total of 262,000.But today as investors awaited the highly anticipated the U.S. nonfarm payrolls report due later in the day the dollar was generally showing strength against a basket of other major hard currencies, as the previous session’s U.S. jobless claims data continued to support. Recent updates evidenced April month’s US nonfarm payrolls claimed at 223k versus 224k expectation.This was a booster for the dollar today and was upper against the yen, on USD/JPY rising 0.22% to 120.00 and stable against the Swiss franc on USD/CHF at 0.9211. Meanwhile, NZD/USD held steady at 0.7446.The benchmark U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 94.74.Derivatives watch:Option strategy: Short ButterflyWe are undoubtedly bullish on pounds trading against dollar and thus from last couple of trading sessions we’ve been recommending reasonably bullish strategies on sterling and now you can observe how pounds responding as per our expectation but uncertain about EURUSD as we see both carries equal downside risk factors. Hence, we advocate Shorting Butterfly to get benefited on any large moves on either side.In order to establish this position, trader has to short one call with a low strike price (ATM or ITM), and short another call with higher strike price (OTM) and buys 2 Calls with an intermediate exercise price (ATM).Expect the underlying exchange rate to move a largely higher or lower but not sure of direction.This strategy can also be constructed using all calls or puts and is done for a net credit.The chart explains the volatily and different payoff at different exchange rate intervals.
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