Sell Euro-Dollar Straddle, Lloyds Recommends: Technical Analysis

Investors should sell one-year euro-dollar options in a strategy known as a straddle because trading patterns suggest implied volatility for the exchange rate may decline, according to Lloyds Banking Group Plc.

Technical indicators show euro-dollar implied volatility may fall to 12.25 percent by the end June or early July, the low side of its recent range, Tim McCullough, a Lloyds technical strategist in London, said in a phone interview. He recommended in a client note selling June 19, 2012, $1.4226 puts and calls on the currency pair. The straddle, a simultaneous sale of a put and a call with the same strike price, aims at profiting from the decline.