BUZZ-COMMENT-Traders might need to insure against a EUR/USD drop

Jan 31 (Reuters) - FX traders can use a simple option to insure against EUR/USD dropping further as we head into February, a month that is usually negative for that major currency pair.

EUR/USD seasonal performance since 2000 shows it has fallen in February for 15 of the past 25 years, including the last eight years in a row. However, seasonality patterns should not be considered in isolation, they need to be corroborated with other factors.

EUR/USD has faltered ahead of the 1.0573 Fibo, a 38.2% retrace of the 1.1214 to 1.0177 (September to January) EBS drop, as it peaked at 1.0534 on Monday. Fourteen-week momentum remains negative, highlighting the overall bearish market structure. It increasingly likely we see an extension to eventually probe the 1.0177 low.

Those who want to protect against a short-term EUR/USD slump could buy a one-week 1.0370 EUR put option at a cost of 47 pips, priced with spot at 1.0378. Profit potential is unlimited if spot is below the 1.0323 breakeven at the Feb .7 expiry. Losses are limited to the 47 pips premium paid.

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