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.
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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.
Admittedly, I was alittle nervous going into the RBA rate decision yesterday. However, AUDUSD was hovering around 0.7485 going into the RBA session.
It was quite certain that RBA wouldn’t lower or raise interest rates. Too much noise in the market about a possible rate cut and then again with inflation and the ‘bubble’ real estate market, the only way is to raise interest rates.
Anyway, I wasn’t so bothered about it, I was more concern about the RBA statement and what it could imply???
Thankfully, it was a neutral statement, one without ‘teeth’. AUDUSD responded positively and powered northwards.
I decided to square the other half of my AUDUSD call option at 0.7550 for a trading profit of 142bps!!!
Thank you RBA, thank you Lowe!
Looked at the 1H and 4H AUDUSD charts and felt that the AUDUSD has bottomed and potentially has a chance to move up in the near future.
So decided to buy a 1 month call option with the following details: –
Spot: 0.7340
Premium: 68bps
BE: 0.7408
Expiry: 12 June 2017
Let’s see what happens.
2017 will be the year most OECD countries will be looking at inflation as a gauge of economic growth.
Today was Australia’s turn on CPI, forecast was 0.7%.
I decided to place a straddle trade with the following details: –
Stop if Offered at 0.7565 (SL at 0.7585), Spot at 0.7595, Stop if Bid at 0.76230 (SL at 0.7595)
As it turned out I was surprised at the lower CPI number of 0.5% and with trimmed figures at 0.4%. I wasn’t suspecting this to happen as I believe inflation is running alittle wild in Australia.
Nonetheless, my Stop if Offered was triggered at 0.7565 and I squared the position at 0.7540 for a trading profit of 25bps.
I hope all of us was there at 12:30pm today for RBA’s rate decision?
This meeting of RBA has been getting a lot of noise in the media since the past three weeks.
I decided to buy a AUDUSD Put Option with the following details: –
Strike; 0.7696, Premium; 34bps, Breakeven; 0.7662, expiry 10am NY 4 May
As it turned out, the RBA decided to cut interest rates by 0.25% to 1.75%. As expected market reacted selling the AUD down aggressively.
Within 15 minutes, I decided to sell the option at 0.7563, locking in trading profits of 99bps!
Thank you RBA.
Trust all of you also managed to capture this opportunity……….(“,).
More drama later into the week…………
This morning 9:30am Singapore time was the Aussie CPI quarterly numbers. This time around, the CPI is important to support what is going on in the economy; rising real estate prices, rising food prices, rising wages. Forecasters was expecting 0.3% for the quarter.
I decided to place my straddle trade at 9:27am with the following details: –
AUDUSD – Stop if Offered; 0.7728, Spot at 0.7758, Stop if Bid; 0.7788 with corresponding SLs at 30bps away
As it turned out the CPI came in NEGATIVE at (0.2)%, it surprised me too!
Immediately the AUD tanked, triggering my Stop if Offered at 0.7728, the initial drop was 88bps down to 0.7670, then, it began to pick up more momentum. At about 1:42pm the spot level was at 0.7633 and I decided to square the position to lock in my trading profits of 95bps.
It’s 2:40pm Singapore time now, and the spot is at 0.7614.
So the total move from the spot at 0.7758 to now is 144bps! So you see, a significant data event and one that financial markets has been talking up to create volatility coming into the data, usually will react violently if the data was significantly different from expectations.
This afternoon is UK quarterly GDP, are we going to see any surprises. Lately, economic data coming out of the UK has been dismal except for the continuing rise in real estate prices.
The 4H + Fibo indicates that the current spot level is at the 50% level.
The 1H + Fibo indicates that the currenct spot level is at the 100% level.
So it looks like any negative surprise to the GDP data could easily cause the GBP to tank?!
Let’s all the be there later.
Ok, it looks like my call was wrong.
Profited from the GBP because the put level was on the higher range. In hindsight, the levels of the AUD, EUR and JPY were all kind of the mid range between the high and low goal posts.
Today’s Australia CPI was negative, indicating that the Aussie economy has gone into deflation the past quarter. This was good for my spot trade which I will share in another write up and makes my put option look alittle better but honestly, the I doubt the AUD level will be hit before the end of this month, only two more days.
Looks like I may be throwing away the options paid for the AUD, JPY and the EUR, then again, if I did a mark to market, then, I lost less doing the options then continuing the hold say an ‘open’ spot position, which would have necessitated a top up by now.
So, as I have always shared with all of you, if you have a fundamental view of a strategic view, then, play the potential opportunity by way of an option, rather than doing a spot transaction.
The FX markets has proven to be most unpredictable. On the March 22nd, I felt strongly that the USD was oversold and the charts seem to indicate it, however, after Yellen’s speech at the NY Economic Club, the USD was killed.
All the majors rallied against the USD and in fact, made new highs for 2016. This was more disheartening, however, I was fortunate in that I played the potential opportunity while waiting for the market to come to me by way of options. Therefore, I have accepted my absolute losses which was the premiums I paid for the options upfront.
I have been hearing from the banks and on the ground that many FX clients have been caught on the wrong foot. Worse still though the USD has made back some gains, the JPY went against the rest of the majors by strengthening against the USD. Can you imagine that the JPY has moved 5 big figures since the last week of March?!
Anyway, when I started seeing the USD gain back ground against the majors I decided to sell of two of my outstanding options; the GBPUSD Put Option and the AUDUSD Call Option.
On April 6th after London opened, the GBP was aggressive sold off, I decided not to wait again like I did two weeks and so decided to sell the put option at 1.4030 for a trading profit of 252bps (breakeven was 1.4282), option originally expiring on April 29th.
On March 31st after NY opened, the AUD continued climbing up against the USD, I put in an order to sell the call option at 0.7700 and it got triggered, locking in a trading profit of 280bps, call option had an expiry date of July 9th.
While the trades turned out in my favor it was not without days and weeks of disbelief that my call was potentially wrong, but instead of waiting closer to expiry, I decided not to star a gift horse n the face, so take profit on the options.
As you can see, the risk reward ratio wasn’t great, on average about 1:1. A better trade would be 2:1 or higher. Anyway, I am just glad to be out.
Now I still have three outstanding put options; EURUSD, USDJPY and AUDUSD which are not in the money and we are going into the second week of April. I have some time left and let’s hope the market moves in my favor.
The Panthenon Investment Group 