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Applying Fibonacci Levels for FX Options Presented by Toni Hansen http://www.TradingFromMainStreet.com [email protected] Options Strategies: For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. An investor should review transaction costs, margin requirements and tax considerations with a broker and tax advisor before entering into any options strategy. Options involve risk and are not suitable for everyone. Prior to buying or selling an option, a person must receive a copy of CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS. Copies have been provided for you today and may be obtained from your broker, one of the exchanges or The Options Clearing Corporation. A prospectus, which discusses the role of The Options Clearing Corporation, is also available, without charge, upon request at 1-888-OPTIONS or www.888options.com. Any strategies discussed, including examples using actual securities price data, are strictly for illustrative and educational purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities. Disclaimer and Terms of Use: Copyright 2008 © Toni Hansen & The Bastiat Group, Inc. All rights reserved. Terms of use apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law. Disclaimer: The Bastiat Group, Inc., the holding company for ToniHansen.com, Swingtrader.net and TradingFromMainStreet.com does not make solicitations, recommendations or offers to buy or sell any security or investment. The Bastiat Group, Inc. does not advocate the purchase or sale of any security or investment. The information provided by The Bastiat Group, Inc. should not be construed as investment, financial, tax or legal advice. The Bastiat Group, Inc. is not a registered investment advisor, commodity trading advisor, broker or broker dealer. Trading in securities may not be suitable for all individuals. The Bastiat Group, Inc. and its members, employees, agents, consultants, analysts, representatives, content and/or service providers, affiliates, subsidiaries, successors and assigns (hereinafter collectively, “The Bastiat Indemnities") assume no responsibility or liability for your trading and investment results. Prior to the execution of any securities trade, you should always consult with your broker or other financial advisor. There is a very high degree of risk involved in trading securities. Past results are not indicative of future returns. About ISE FX Options Accessible through your options broker Exchange-listed securities Cash-settled in U.S. dollars European style exercise Can be traded as spreads Currency Convention Symbol Australian dollar USD/AUD AUX British pound USD/GBP BPX Canadian dollar USD/CAD CDD Euro USD/EUR EUI Swiss franc USD/CHF SFC Japanese yen USD/JPY YUK Investors can view the underlying rates from several leading market data vendors and financial websites, including Big Charts, Bloomberg, ILX, Reuters, and Yahoo! Finance. www.ise.com/fx More FX Options Education • • • • • • • • Please visit ISE archives at: www.ise.com/archives For upcoming ISE webinars visit: www.ise.com/webinars Sign-up for Trade Alerts: www.ise.com/fx Register for podcasts: www.ise.com/podcasts http://www.swingtrader.net FX Options Webinar Series Date Time Ilian Yotov on "Applying Options Methodologies to Currency Trading" 11/16/08 4:30 PM Steve Misic on "Options Hedging Strategies for Forex" 11/18/08 4:30 PM Mike Tosaw on "FX Options - Low Correlation Alternative to the Equity Market" 11/23/08 4:30 PM Tom Busby on "Dollar vs. Euro - FX Options Trading Opportunities" 11/25/08 4:30 PM John Netto on "Winning Options Strategies for the Forex Trader" 11/30/08 7:30 PM Introduction of Fibonacci Leonardo Pisano introduced the numbering sequence now known as the Fibonacci sequence to the West in 1202 in his publication Liber Abaci. Fibonacci Sequence The Fibonacci numbering sequence is created by first beginning with 0 and adding 1. At that point, each new number in the sequence is the sum of the previous two numbers. For instance, 0+1 = 1, 1+1=2, 1+2=3, and so on. The sequence of numbers hence looks like this: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144… Fibonacci Ratios The relationship of each two adjacent numbers within this series yields a predictable ratio: When you divide the former number by the latter after the first 3 pairs, beginning with 8 divided by 13, it yields approximately 0.618. Dividing the latter number by the former number after the first 3 pairs also results in another relationship from the sequence. This relationship yields approximately 1.618. To take these relationships further, if you skip a number and then divide, the result is 0.382. This number, when added to 0.618, equals 1. Fibonacci Levels 138.2% 100.0% 61.8% 50.0% 38.2% 0.0% -38.2% Support & Resistance Support & Resistance levels are price zones in the market where a security is liable to react in some manner that affects the trend which is in play as the support or resistance level hits. Trend Comparison Chart © 2008 IntelliChart July Buy USD/CAD Chart © 2008 IntelliChart Buy Formation USD/CAD Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Townsend Analytics Ltd. Applying Fibonacci Chart © 2008 Townsend Analytics Ltd. Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Applying Fibonacci Chart © 2008 Finance Chart Trading Made Simple Series Toni’s CD bundle: 5 Technical Signals You Cannot Trade Without (7 hours on 4 CDs, 238 page pdf) http://www.swingtrader.net Toni’s interactive video courses and manuscripts detailing her trading and investment strategies All three products: $279* (*plus shipping. $497 when sold separately.) Trading Made Simple: No Indicators Necessary (3 hours on 2 CDs, 100 page pdf) Toni’s Guide to Successful Market Timing (76 pdf manual) http://www.swingtrader.net