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GLOBAL
INTRODUCTIONWELCOME TO FXDD’S BREAKOUT OPTIONS STRATEGY GUIDEBreakout options strategies have been popularized as options trading strategies that allow tradersto profit regardless of the direction of the exchange rate trend or whether it “breaks out.”The ability for breakout options strategies to allow traders to profit when exchange rates trend inmore than one direction has given options trading a legendary edge over other financial instruments.While breakout means trading volatile currencies that might make a sudden big up or down pricemove, breakout also means volatility. Breakout options strategies are capable of trading and profitingfrom changes in volatility directly and display their real power when the direction of volatility goes inthe favor of the options trader.There are many breakout options strategies designed to take advantage of changes in volatility andsudden price breakouts. This tutorial will cover the different strategies and their underlying logic.Breakout options strategies can be helpful ways to invest or leverage existing positions for traderswith a volatile market sentiment.The information contained within is purely for education purposes and must not be construed as toindicate any kind of investment advice.HIGH RISK WARNING: Before you decide to trade either foreign currency (“Forex”) or options,carefully consider your investment objectives, experience level, and risk tolerance. Over-the-counterleveraged Forex spot trading (“spot trading”) and options trading (“options trading”) both carryhigh levels of risk that may not be suitable for all investors. Educate yourself on the risks associatedwith spot and options trading, and seek advice from an independent financial or tax advisor if youhave any questions. With spot trading, you could lose some or all of your initial investment; donot invest money that you cannot afford to lose. Leverage, offered as part of spot trading, createsadditional risk and loss exposure. With options trading, you could not only lose all of your initialinvestment, but the potential to lose money is potentially unlimited when you write an option.Purchasers and sellers of Forex options should familiarize themselves with the type of option (i.e.,put or call) that they contemplate trading and the associated risks. You should calculate the extentto which the value of the options must increase for your position to become profitable, taking intoaccount the premium paid, other transaction costs, if any, and rate of premium/time decay.BREAKOUT OPTIONS STRATEGIES2
BEFORE YOU GET STARTEDPractice Accounts.Test these strategies risk-free with an FXDD Options Trader demo.Register now for your free practice account at www.fxdd.com/mt.FXDD Options Trader·Completely customizable·Downloadable or Web-based·Built-in strategy optimizer·Risk manager simulator·Trade spot FX or FX optionsVisit our YouTube channel for platform tutorials and basic education.Watch Videos: www.youtube.com/fxddglobalBREAKOUT OPTIONS STRATEGIES3
LONG STRADDLEDESCRIPTION & TIPSDIFFICULTY: BeginnerThis strategy consists of buying a call andbuying a put, both with the same strike priceand expiration. In this strategy, it is typical forboth options to be out-of-the-money.OUTLOOK: BreakoutRISK LEVEL: LowMAX GAIN: UnlimitedMAX LOSS: Net Premium PaidEXAMPLE:Buy Call @ 1.35Buy Put @ 1.35BREAKOUT OPTIONS STRATEGIES4
LONG STRANGLEDESCRIPTION & TIPSDIFFICULTY: BeginnerThis strategy consists of being long a call optionand long a put option with the same expiration,but where the call strike price is above the putstrike price. It is typical for this strategy thatboth options are out-of-the-money.OUTLOOK: BreakoutRISK LEVEL: LowMAX GAIN: UnlimitedMAX LOSS: Premium PaidEXAMPLE:Buy Call @ 1.37Buy Put @ 1.32BREAKOUT OPTIONS STRATEGIES5
SHORT CALL CALENDAR SPREADDESCRIPTION & TIPSDIFFICULTY: IntermediateThis strategy consists of being long one calloption and shorting a second call option witha more distant expiration. The strategy mostcommonly involves calls with the same strike(horizontal spread), but can also be done withdifferent strikes (diagonal spread).OUTLOOK: BreakoutEXAMPLE:Buy Mar Call @ 1.3450Sell Oct Call @ 1.3450Current Month: JanuaryRISK LEVEL: HighMAX GAIN: Net Premium ReceivedMAX LOSS: Near Option expiresworthless, UnlimitedBREAKOUT OPTIONS STRATEGIES6
SHORT PUT CALENDAR SPREADDESCRIPTION & TIPSDIFFICULTY: IntermediateThis strategy consists of being long one putoption and shorting a second put option witha more distant expiration. The strategy mostcommonly involves puts with the same strike(horizontal spread), but can also be done withdifferent strikes (diagonal spread).OUTLOOK: BreakoutEXAMPLE:Buy Mar Put @ 1.35Sell Oct Put @ 1.35Current Month: JanuaryRISK LEVEL: HighMAX GAIN: Net Premium ReceivedMAX LOSS: Near Option expiresworthless, UnlimitedBREAKOUT OPTIONS STRATEGIES7
SHORT CALL BUTTERFLYDESCRIPTION & TIPSDIFFICULTY: AdvancedThis strategy consists of being long two callsat middle strike and shorting one call each atlower and upper strike. All the options mustbe the same expiration. The upper and lowerstrikes (wings) must both be equidistant fromthe middle strike (body).OUTLOOK: BreakoutEXAMPLE:Sell Call @ 1.33Buy 2 Call @ 1.35Sell Call @ 1.37RISK LEVEL: MediumMAX GAIN: Net Premium ReceivedMAX LOSS: High Strike - Middle Strike Net Premium ReceivedBREAKOUT OPTIONS STRATEGIES8
SHORT PUT BUTTERFLYDESCRIPTION & TIPSDIFFICULTY: AdvancedThis strategy consists of being long two putsat middle strike and shorting one put each atlower and upper strike. The upper and lowerstrikes (wings) must both be equidistant fromthe middle strike (body), and all the optionsmust be the same expiration. The strategy isuseful when expecting the underlying to beoutside of range at expiration of options.OUTLOOK: BreakoutRISK LEVEL: MediumMAX GAIN: Net Premium ReceivedMAX LOSS: High Strike - Middle Strike Net Premium ReceivedEXAMPLE:Sell Put @ 1.32Buy 2 Puts @ 1.35Sell Put @ 1.38BREAKOUT OPTIONS STRATEGIES9
LONG CONDORDESCRIPTION & TIPSDIFFICULTY: AdvancedThis strategy consists of being long one calland shorting another call with a higher strike;also being long one put and short another putwith a lower strike. The strategy is useful whenexpecting a sharp move up or down. Thisstrategy can be thought of as a bull call spreadand a bear put spread.OUTLOOK: BreakoutEXAMPLE:MAX LOSS: Net Premium PaidSell Call @ 1.38Buy Call @ 1.37Buy Put @ 1.36Sell Put @ 1.35RISK LEVEL: LowMAX GAIN: (High Call Strike - Low Call Strike)OR (High Put Strike - Low Put Strike) Net Premium PaidBREAKOUT OPTIONS STRATEGIES10
LONG IRON BUTTERFLYDESCRIPTION & TIPSDIFFICULTY: AdvancedThis strategy consists of shorting a call atupper strike, being long a call and long a put atmiddle strike, and then shorting a put at lowerstrike. The strategy is useful when expectinga sharp move either up or down in underlyingcurrency price during the life of the options.OUTLOOK: BreakoutMAX GAIN: High Strike -Middle Strike - Net Premium PaidMAX LOSS: Net Premium PaidEXAMPLE:Sell Call 1.37Buy Call 1.35RISK LEVEL: LowBuy Put @ 1.35Sell Put @ 1.33BREAKOUT OPTIONS STRATEGIES11
CONTACT INFORMATIONIf you would like more information on FXDD and trading FX options,we would love to hear from you!LIVE CHAT:Talk to a Forex specialist in real ALL US: 356.2013.3933EMAIL US: sales@fxdd.com.mtBREAKOUT OPTIONS STRATEGIES12
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The ability for breakout options strategies to allow traders to profi t when exchange rates trend in more than one direction has given options trading a legendary edge over other fi nancial instruments. While breakout means trading volatile currencies that might make a sudden big up or down pri
