The options market is gearing up for a bull run in the dollar after February's non-farm payrolls showed improvement in the U.S. jobs picture.
Options traders saw sizeable downside put buying in the EUR/USD, predicting a drop in the euro to as low as 123.50 after the report.
"I guess the theory is that a solid number makes the Fed less accommodative and some new story comes out of Europe," said Jim Iuorio, TJM Institutional Services director.
The bullish bets on the dollar came even as the euro rose and the U.S. dollar index fell marginally following the report.
U.S. payrolls rose 192,000 in February, and the jobless rate fell to 8.9% from 9%. That's the highest payrolls number since May last year, and the lowest unemployment rate in two years.
The bullish stance taken today is in contrast to how options traders were recently playing the dollar.
Before Friday's payrolls data, the option players were setting up for a long, boring year ahead for the buck, selling straddles in the PowerShares DB Dollar Index Bullish Fund, a strategy that is most profitable if the dollar doesn't move much.
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