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After the majors ripped through the USD for a better part of January, I decided that it was about time the USD was oversold or too far beaten up, that it will shortly be time for a reversal.

I decided to buy three options as follows: –

USDJPY @ Call option expiring Friday, 2 March; strike at 108.83, premium at 1.10 and breakeven at 109.93

GBPUSD @ Put option expiring Friday, 2 March; strike 1.4313, premium of 150bps and breakeven at 1.4163

AUDUSD @ Put option expiring 16 February; strike 0.8113, premium of 72bps and breakeven at 0.8041

 

I sold off the GBPUSD put option at 1.3990 for a trading profit of 173bps.

I sold off the AUDUSD put option at 0.7790 for a trading profit of 251bps.

My USDJPY option is in trouble with spot at 107.15, the option may expire in early March worthless.  In any case, at the time when I bought the option I was prepared to part with the option monies, so it’s ok.

More importantly, these three option trades clearly demonstrate that we can’t win all the time.  What’s important is to follow and study the market, put our mark on it and wait for the market to come to us, however, we should always manage the risk parameters, if we don’t, chances of losing monies is imminent.

Now, I need to think about doing the reverse in the USDJPY, what do the rest of you think?

I wasn’t sure whether the FOMC will turn out like the BOE last month, but there was sufficient buzz in the market to suggest that it could be a volatile event.

I decided not to stay up for the action but instead place some one day vanilla options with the following details:-

EURUSD Call Option; Spot 1.1762, Premium; 40bps, Breakeven; 1.1802

USDJPY Put Option; Spot 113.05, Premium; 38bps, Breakeven; 112.67

AUDUSD Call Option; Spot 0.7610, Premium; 21bps, Breakeven; 0.7631

Decided to square all the three options as follows: –

EURUSD at 1.1830 for a trading profit of 28bps

USDJPY at 112.61 for a trading profit of 0.6 yen

AUDUSD at 0.7634 for a trading profit of 3bps

This whole exercise turned a small profit of 36bps……………aarrgghh…………the whole event turned out to be a lacklustre event.

Ok, I am closing my books for 2017.

Will put up the final performance figures for 2017 shortly.

 

It looks like the two AUDUSD call options that I bought; one expiring tomorrow and the other one on December 14th will both expire WORTHLESS.

And I am going to be hit with a loss of 142 bps being the premiums paid upfront. Actually, at the start, I have already decided to risk the 142bps, so it’s okay but still sucks! Hahahahahahahahaha……………ok people………..alittle humour?!

This year end is proving to be really difficult to trade, maybe, should just close my trading books and call it a day for 2017?!

Then again, we have major potential events happening this month, will it bring with it high volatility given the lower trading volumes?

Let’s see.

Saw the low in the AUDUSD this morning and decided to add on to my earlier call option by doing another 1 month call option expiring Friday, December 14th with the following details:-

Strike at Spot: 0.7620

Premium: 72bps

Breakeven: 0.7692

Let’s see.

As expected, RBA kept interest rates the same and the statement was positive and supportive of the labour market and economic conditions in the country.

This should be supportive for the AUDUSD, maybe, my call option will be fine.

Let’s see.

I feel that the AUDUSD is somewhat oversold, given the strong economy, strong exports, stable housing, low interest rates, good employment and great weather.

So I decided to buy a one month call option with the following details: –

Strike at Spot: 0.7665

Premium: 70bps

Breakeven: 0.7735

Currently, it is trading at 0.7700

The two AUDUSD put options caused me premiums of 65bps.

You win some you lose some.

The lesson learnt this time around, is that when dynamics change, it is important to take two steps backwards to study the changing dynamics and to ascertain whether the goalposts are changing or have changed and why?

Felt that AUDUSD was getting too high and at levels where it should not be, so I decided to buy a put option for 1 week expiring Friday, July 21st with the following details: –

Spot: 0.7730, Premium: 35bps, Breakeven: 0.7695.

Let’s see.

Felt that the AUDUSD was not going south as strongly as I had anticipated so decided to square the option at 0.7580 for a trading profit of 57bps

I also felt that the AUDUSD was unsustainable.

So I decided to buy a one month put option with the following details: –

Spot: 0.7692, Premium 70bps, BE: 0.7622, Expiry: 2 August

Let’s see.