I view the foreign currency markets as somewhat stable, and am expecting steady to lower volatility into the summer months. Therefore, I want to extensively apply the short strangle or delta neutral strategy here.

One example is the June British Pound in which I have recommended short 166 and 167 calls against 156 puts. This is a new, long-term position expiring June 6th.

The basic idea behind a short strangle is to sell both an out-of-the-money call and put, collect the premium, and hopefully let them expire worthless.

The strategy is delta (directionally) neutral when the bearish or bullish values are combined and they net approximately zero. Don't try this without broker assistance. An experienced options broker should be used to advise on defense of the position should it become necessary.

I'm avoiding gold"the options are too cheap to sell and not worth buying.

I am strangling July silver however. I'm recommending shorting the 575 and 550 calls against 500 puts.

I remain bullish: buy bull call spreads in July wheat and soybeans. Inventories are very low and the weather too wet so far. In corn and oats, buy the futures and sell a near-the-money protective call against them.

I believe that the long divergence between the stock and bond markets has run its course. Consequently, I am recommending buying bear put spreads on the S&P 500 to control the risk in what is still a volatile market prone to corrective rallies. But I want to remain delta neutral both the bond and note futures.

Key to my approach in any market is slowing the risk to a tolerable level and especially selling options to take advantage of time decay.

March 26, 1997
Tim Zurick
Ira Epstein & Company

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