Percentage price changes for March 2012 futures over 90 days ending on Nov. 18, 2011 show a similar pattern with minus signs as the U.S. dollar index at plus 4.67% strengthened against other currencies: Swiss franc – 14.29%, euro – 5.37, British pound – 4.27%, Canadian dollar – 3.57%, Australian dollar – 2.64%, and Japanese yen – 0.58%.
“A futures pair” (below) shows the possibility of spreads between the euro and Australian dollar options. For the purpose of this chart, the space between prices for the two currencies is reduced by multiplying Australian dollar prices by 1.37 (because the average price of the March euro over the Sept. 1 to Nov. 18 period is approximately 37% larger than the Australian dollar futures). Variations in the March 2012 call prices indicate that the Australian dollar options were more variable than the euro during this period.
As long as the options price relationship holds, spreads between the pair could be profitable.
For example, buying relatively undervalued Australian dollar futures at 0.9241 on Oct. 4 along with a sale of euro futures at 1.3239, and reversing the spread trade on Oct. 14, would have produced a gain of 9.9% for the Australian dollar vs. 4.7% for the euro’s March contract.