When the dust settled after the rate cut by RBA on February 3rd, and looking at my charts, it seemed at that time a potentially good trade to do the 3 month call option.
If you recall my breakeven is 0.8097, the spot is now 0.7625, so we are more than 400bps+ away from my breakeven.
This is the currency markets for you.
Seems the RBA is more concerned about rejuvenating growth than to tame asset bubbling.
Well, we still have time and who knows anything can happen. Time is still in my favor.
I am just looking at the AUDUSD and it looks so ripe to do a Long Call Option.
The Daily chart and the 4H chart suggests technically that the AUD has turned from the bottom. In fact, it is about to cut up on the 200 day average of 0.7898 in the 4H chart.
Therefore, I am confident to buy a 3 month call option strike at 0.8000 with a premium of 97bps, a breakeven of 0.8097 and expiring on 29 May 2015.
Let’s see what happens.
The much waited UK inflation report to confirm whether or not BOE will or will not cut rates of hold rates of increase rates.
I really didn’t know whether the market was going to go because the last clue from the BOE was that they will stay put for a while and maybe even consider cutting rates. However, the media had a different view. All the media spots were gunning that the BOE would be more hawkish.
Since, this data has been put on the pedestal, I thought I might as well try to see whether I can squeeze a trade out of it or not.
Since, I had no inclination one way or another, I decided to put a straddle spot out of the money trade.
At about 6:20pm, I placed a stop if bid at 1.5250 and stop if offered at 1.5185 when spot was trading at 1.5220.
When the data came out the GBP shot up to 1.5320 within 15 minutes. My stop if bid order was triggered at 1.5250, I decided to wait till about 9:30pm and squared the position at 1.5353 for a trading profit of 103bps.
Thank you BOE!
Market was anticipating the much awaited non farm payroll numbers and the unemployment numbers to confirm that the U.S., is on track in its economic growth recovery.
Wednesday’s ADP number was not encouraging at 213K against forecast of 224k, however, it was mitigated by the upward revision of December’s number from 241K to 253K. This means that there is a possibility that the non farm payroll numbers could surprise on the upside of forecast.
Market was steady at about 9:10pm Singapore time. My hunch told me that the non farm payroll numbers would be better, so I decided to bet on my hunch.
Orders: –
1. GBPUSD – Stop if Offered at 1.5290 when spot was at 1.5323
2. EURUSD – Stop if Bid at 1.1500 when spot was at 1.1486
3. EURUSD – Bought a put option expiring Monday, February 9 with a premium of 36bps, spot at 1.1486 an breakeven at 1.1450
4. USDJPY – Stop if Bid at 117.60 when spot was at 117.28
Of course, all of us knew what happened, the non farm payroll numbers came out at 257K busting forecast of 236K and the highest in the past 6 years.
Market sold off the GBP, EUR and the JPY in a BIG way!
At about 11:15pm, I decided to square off all the trades.
Squared off the GBPUSD at 1.5248 for a trading profit of 42bps.
Squared off the USDJPY at 118.88 for a trading profit of 128bps.
EURUSD stop if bid order was not triggered.
Sold off the put option at 1.1326 for a trading profit of 124bps.
In absolute terms, we made 294bps in totality for all 3 trades.
WHAT A NIGHT! THANK YOU UNITED STATES OF AMERICA!
Ever since RBZ lowered its rates last month, speculation was building in the marketplace about whether the RBA would or wouldn’t lower its interest rates as well?
A week coming up to Ferbruary 3rd saw numerous analysis put out by Bloomberg, Reuters and of course, the banks. Speculation that the RBA wouldn’t lower rates because it is concern about the high property prices and high cost of living.
Guess what?
At 11:30am, the RAB announced a 0.25% rate cut down to 2.25% from 2.50%. Surprise surprise!! Then again, I do not believe it was a surprise, however, none of us have a crystal ball, so he really can’t say for sure what the RBA was going to do.
However, my hunch was that it would cut rates because of mounting pressures. So I placed a stop if offered level at 0.7765 when the spot rate was 0.7805, about 10 minutes before the announcement. I also placed a stop if bid at 0.7835. In addition, since my inclination was rate cut I decided to gamble with buying a put option at 0.7765 for one day with a premium of 35bps, expiring on February 4th 10am NY time.
When the announcement came out, the AUDUSD fell off the side of the cliff falling over 100bps within 5 minutes.
My stop if offered order was activated at 0.7770 and I squared the spot trade at 0.7659 for a trading profit of 106 bps.
I also decided to buy back the option and locked in another 100bps trading profit.
Thank you RBA, I secured a 206bps trading profit within 10 minutes of the announcement.
What a great start to the month of February.
The markets was so volatile, so on Jan 14th at about 9pm, I decided to exit the option at 0.8290 for a trading profit of 105bps (breakeven was 0.8185).
What a great trade for the first trade of the year!
On 6 Jan, my ichimoku and stochastics looked ripe to go long on the AUDUSD and I executed a call option expiring Friday, 16 Jan; strike at 0.8118, premium at 57bps and breakeven at 0.8185.
The following few day, the AUDUSD actually went down to 0.8030 and I thought………..Oh dear my decision was wrong, however, I believe strongly that with the turmoil in Euroland and uncertain disinflation in the UK and hard to believe recovery in the US and crumbling oil prices………….surely everyone would go to the safe haven AUD currency.
Well, the AUDUSD certainly kept me nervous, yesterday it went to a high of 0.8240 before slipping down to 0.8160 on fears of poor employment numbers.
Guess what? Today, the employment numbers came in very strong at 37,400 jobs versus forecast of 5,300 jobs. It kept AUD bidded the whole day and then by London open it lost steam again falling back to 0.8165.
Then the SNB announced that they are removing the cap of 1.20 on the EURUSD…………….game over! AUDUSD shot up to 0.8294, GBPUSD shot up to 1.5266 and USDJPY shot up to 116.25…………..everyone was selling the EURUSD and it crashed down below 1.17 very quickly!
I am getting too old for this rollercoaster ride, then again, it’s fun.
This is my first trade for 2015 and many more to come, so stay tune…………..
By the way, I will be rounding up a performance report for 2014, though I am sure all of you have experienced it yourselves last year; the first half was sleepingly boring and then the second half of the year was ‘rock and roll’. Nonetheless, because of the difficulty in calling the trades and reading the market, our overall absolute performance for 2014 was much lower than in 2013. Anyway, will share more information on the numbers shortly.
More importantly, will be writing an article my thoughts for 2015!
After the initial big drop starting at about 6pm Asia time from 1.6830, I decided to do a 2 week call option struck at 1.6735 after almost a 100bps, however, I felt that there was going to be a rebound.
Premum was 56bps and breakeven was 1.6791.
Unfortunately, the GBPUSD continued its slow grind southwards and by the 29th, it was at 1.6585.
So, this call option didn’t work out and we made a loss of 56bps.
Decided to execute a 2 week call option on the EURUSD with a premium of 49bps as volatility was very low.
Gave myself time for the market to come to me.
On August 27th in Asia session, the EURUSD hit a low of 1.3135, but I held onto the position, by the time the afternoon rolled around, the EUR started picking up momentum.
So I decided to square off the option at 1.3178 for a trading profit of 300bps…………Fantastic!!!!!!
Remember people, options are great in the sense that you would have rationalized taking the loss, that is, the cost of the premium when you execute the trade and that’s your maximum loss, now you have time on your side to make the maximum potential upside.
Was the flows moving south for the GBPUSD, so I decided to do a quick trade in late afternoon Asia session and London opening session.
Short the GBPUSD and squared at 1.6835 for a trading profit of 30bps.
I am born in the Year of the Tiger.
The Panthenon Investment Group 