Safeguard Canadian dollar trade with calendar spread

It looks like the Canadian dollar has been riding a gesture of rebounding oil prices to become the fastest-rising currency in the world in the Q1 of 2015.

The Canadian dollar rose by nearly four per cent, far outstripping a two per cent rise by second-place New Zealand's dollar. Those gains are accounted despite a "whopping" nine per cent plunge during a "brutal" January for the Canadian dollar.

Canada, New Zealand, Singapore, Australia, South Korea and Norway all saw their currencies make up ground on the U.S. dollar in the first three months of the year while the euro has dropped nearly to 2%.

Technical and currency futures advice:
Strategy: Calendar spreads using Futures

The way we read the daily and weekly technical charts suggests intermediate consolidation pattern is most likely on loonie's uptrend against dollar. Although we suspect further gains of CAD some signs of minor humps are to be rested aside in order to short on currency futures of USDCAD. Short coverings are not advisable at this juncture for traders who already have open positions.

How to construct: Futures Calendar Spreads are designed to profit from the difference in rate of movement between near term futures contracts and longer term futures contracts and are therefore much less volatile positions than outright futures positions. Futures Calendar Spreads are any futures strategies consisting of futures contracts of different expiration months on the same underlying currency together into a single position.

Margin advantage: The main merit of this strategy is that Futures calendar spreads requires much lower margin than outright positions due to the fact that the movement in one future contract is hedged by a counter movement in another futures contract resulting in much lower overall price volatility.

Lower margin leads not only to higher return on capital but also allows the participation of futures traders with small accounts.

Profit for such positions may typically be generated due to more time decay to expiration. The chances of hitting our targets will have Theta (time measure) benefits.