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Daily Archives: February 3rd, 2014

It’s interesting how the forex markets can really give our hearts a good workout!

Gladly, I bought a call option on the GBPUSD and was prepared right at the get-go, to lose the premiums of 46bps.

As you will recall, I did the trade on January 14th; struck at 1.6390 with a breakeven of 1.6436.  After I did the option the GBP started to turn down to 1.6312 on January 16th.

Like all traders, while I was happy to lose the premiums that I paid for the option, the little guy at the back of your head always wishes that the analysis on your trade is correct.

On the fateful day of January 17th, the GBPUSD miraculously moved upwards based on very strong retail sales.  It moved all the way up to 1.6458 during London morning.

My option was due at 10am NY session or 10pm Singapore time.  NY opened with GBPUSD still staying quite firm and my option was eventually closed at 1.6449 for a very tiny profit of 13bps.  I am just happy I didn’t have to forgo my premiums.

The gold trade I did back in December 2013 and adding on a call option which I sold, received $30 in premiums and expiring January 30th, 2014.

Let’s recap some of the trade details; I bought gold at spot $1,232 on December 10th, 2013.  Gold steadily moved upwards from then on and I decided to sell a call option at $1,246 expiring January 30th, 2014, hoping to give myself sufficient time to ensure that the option was exercised.

While I was busy with Christmas and the New Year’s, I stopped all trading except this outstanding gold trade.  Having done the trade I was alittle nervous when gold decided to turn south towards the end of December reaching a low of $1,187 on December 20th.  It meant that I was facing a mtm of about $45 loss per kg.  Then, it started climbing up again, which was a welcome relief, however, I was beginning to think that I should have placed a stop loss level, as gold began dropping again, back down to $1,187 on December 30th.

However, since I had time and the fact that I know with a high level of confidence and comfort that whenever gold drops below $1,200, it will only be temporary and as long as I have time, I do not have to be unduly worried as the floor was established in June 2013 at $1,179.

Of course, I knew that gold was going to trade at a broader channel of between $1,200 and $1,300.  I didn’t think that it would go higher than $1,300, given that most central banks around the world has stopped increasing liquidity and if anything at all may begin to taper following the footsteps of the U.S.  So I knew the upside was somewhat capped.

Also, the fact that gold today is an asset class by itself, it would validate a fair price value of about $1,100.

From the new year onwards, gold just did a steady grinding path upwards.

On January 30th the high was during the NY session at $1,268 and the low was during the Asian session at $1,237 and since my option was expired at 10am NY time, I had the benefit of the uptick in gold prices.

The option was exercised against me, since the strike was at $1,246, so I delivered my gold at $1,246, after having bought it for $1,232 for a trading profit of $14 per kg.  However, I also benefited from the $30 per kg premium for the call option that I sold, so my total profit was $46 per kg.

Pretty good trade if I may say so, of course, with some anxiety during the past month and a half.

cny 2014