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Monthly Archives: November 2013

Performance Review of October 2013

October was a difficult month for me as I really couldn’t ‘sniff’ out trading opportunities, maybe, it’s because I am already comfortable with what I have made from trading year to date that I didn’t want to take on any unnecessary risks.

Nonetheless, as traders we owe it to ourselves to continue trading!

I did 2 options and 3 spot trades, all the trades were profitable giving me an absolute profit of 28.6%.

Year to date, my absolute return is 250.1%, adding on this month’s trading profits, the total absolute return for this year so far is 278.7%.

Trade: Long GBPUSD

I did a quick trade last night during NY session; entered Long GBPUSD at 1.6328 and squared the spot position at 1.6369 for a 41bps trading profit.

AUDUSD Put Option

Hahahahahahahaha……………..look at what the CNY PMI and the US has done to the AUD.  I honestly did not expect the AUD to weaken today the way it did.

You know what?  I should have seen this coming if I had the time to look at the charts.  Yesterday, the AUD fell by 100bps and this morning when I woke up it was a t 0.9225.  Thank you Mario Draghi and the rumours floating about regarding the possibility of negative interest rates.

Well., guess what?  Draghi just came out to comment that ‘people should not speculate that the ECB will implement negative interest rates’, the EUIR strengthened about 40bps to 1.3462.

Think about it for a moment, is there really a need for ECB to implement negative interest rates when it has an arsenal of other monetary policies available to implement and let’s not forget also fiscal policies.

Update Trade; 1 day Call Option on EURUSD expiring on November 20th with a breakeven of 1.3543

Cie La Vie………….I knew it was a bet on my part which is why I positioned a smaller nominal size on this option trade.

Well, as it turned out, ‘rumours that ECN may implement negative interest rates’ tanked the Euro by more than 150bps.

The call option expired worthless and I suffered a loss of 28bps.

Trade: 1 Day Call Option on the EURUSD expiring November 20th, 2013

I had to leave my trading desk this evening, but felt that the EURUSD was going to move up somewhat, based on my technical analysis; Ichimoku and possible better ZEW Economic Sentiment at 6pm (Singapore time).

So at about 5pm, I bought a small position, one day call option on the EURUSD expiring November 20th; Spot: 1.3515, Premium: 28bps and Breakeven: 1.3543.

Unfortunately, the ZEW Economic Sentiment came out lower than forecast at 60.2 versus 63.1, more importantly, is that the German ZEW Economic Sentiment came out flat at forecast of 54.6, so still staying above the 50 threshold level.  What is more important is the counterbalancing stronger Germany versus the rest of the weaker Euroland.

EURUSD has stayed in a narrow range since issuance of data between 1.3491 and 1.3519.  Let’s see if my trade fairs better tomorrow, we still have time till NY 10am.

Trade Update: AUDUSD Put Option expiring 22 November 2013

I decided to square off this option prior to my leaving for my holiday.

Last Wednesday, the AUDUSD continued to fall and it went under 0.9300, I sold the option at 0.9285, you will recall that my breakeven was 0.9533, so this trade gave us a nice trading profit of 248bps.

So, while I was targeting for a 1.6:1 payout, we were fortunate and managed to secure a payout of over 2.4:1, this was a great trade.

What is ironical about the fx world is when I was away on my holiday, on November 21st and 22nd, the AUD dropped another 100bps to 0.9143………..hahahahahahahaha.

Then again, who can predict that the AUD will collapse again so near the expiry date, I certainly did not.  More importantly, I would not carry any open positions when I am away on a holiday.

Hello

Hi Everyone,

Sorry for the radio license the past week.  I took a short holiday from Thursday, November 14th to Monday, November 18th with my wife to R & R.

You know, my gut was telling me that Janet Yellen would wave the flag of QE accommodation during her speech last Thursday night (Singapore time).  However, it doesn’t matter as I was on holiday and wanted to TOTALLY switch off from any trading.

I will update you shortly on what I did on the AUD Put Option expiring November 22nd and a short call option done on the EURUSD today.

Trade Update: Put Options bought expiring 1 November 2013

Wow……….wow…………wow………..the EUR and GBP collapsed!

I squared the two put options; one on the EURUSD and the other on the GBPUSD as follows: –

GBPUSD; BE 1.6107 and sold the option at 1.5966 for a trading profit of 144bps

EURUSD; BE 1.3713 and sold the option at 1.3518 for a trading profit of 196bps

I must confess that was really a lucky trade.  I did these two short dated option trades because I was only comfortable to give up so much for the premiums just in case I was totally wrong.

The ADP came out weak, Chicago PMI came out strong, Bernanke was neutral, I also truly couldn’t explain the big drop in the majors except to say that I was lucky.

These two trades were totally predicated on looking at technicals; Ichimoku, Stochastics and Bollinger bands, it all pointed to a oversold USD.  More importantly, I was prepared to gamble away the option premiums, however, I reduced my exposure to the premiums by shortening my tenor and also reducing the nominal trade size.

Trade: Bought options on 30 October expiring 1 November

I decided on October 30th to buy some overnight options or 2 day options as I was going out to play golf the next day.

The options bought was: –

EURUSD Put Option; Spt 1.3765, BE 1.3713, Premium 52bps

GBPUSD Put Option; Spt 1.6054, BE 1.6107, Premium 53bps

The above trades were to play up to the ADP, more importantly, to potentially capture FOMC.

Performance Review September 2013

For the month of September, I did a total of 9 trades; 5 spot trades and 4 options.  I lost on one option and won on the rest.

What is important to bear in mind is that options is a great way to minimize your loss upfront and psychologically accept the cost or loss prior to executing the trade.  In other words, I made the decision on my risk appetite and was prepared to gamble away US$8,800 in premium cost of the GBPUSD Put Option.

Nett of the loss of the option trade which was a negative 8.8%, our nett absolute performance for the month of September was 51%.  Adding this on to our total absolute performance currently standing at 199.1%, bring the total absolute performance to 250.1% year to date.

Some of you may or may not yet have asked me the question as to how and why I measure my performance on an absolute basis rather than an accumulative basis?  An accumulative return distorts the overall return when one is making good monthly returns, the base ends up being larger and larger and then, the return for the on going month becomes smaller relative to the larger base, even though in absolute terms, the monthly return achieved could be considerable.

Absolute returns are more realistic, I set aside my principal monies or collateral in account X and then, I deposit my profits or debit my losses from a separate account Y.  My absolute returns is simply profits or losses for the month divided by X expressed as a percentage and then adding it on or subtracting from Y.  Y would be the total aggregate net profits divided by X expressed as a percentage.  In other words, if US$100,000 is my X and I have a value of US$200,000 in Y, then my absolute return is 200%.

I trust the explanation clarifies any queries you may have.