Earnings season is coming, and currencies can help you assess how the stock market will fare.
Even if you don't trade currencies, they can be a great tool for navigating earnings season. And with second quarter earnings looming, Todd Gordon, co-head of research and trading at Aspen Trading Group, has a strategy for using currencies to protect against the prospect of dismal reports. "I have a currency trade that you can put on and hedge against a falling stock market," he told CNBC's Melissa Lee.
What, exactly?
"With the stock market falling, you want to be short the Canadian dollar," he says, noting that Canada has had two consecutive weak jobs reports along with disappointing manufacturing data. "Dollar-Canada will rally with a falling stock market and falling crude oil," he says, and adds that it's possible to hedge a $100,000 portfolio with about a $2,000 currency position on margin.
Gordon wants to buy the dollar against the Canadian dollar after a pullback to 1.0200, setting a stop at 0.9900 and a target of 1.0600.
