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Tag Archives: foreign exchange

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.

 

Trade: 27 September @ Short AUDUSD at 0.9358

On September 27th, I saw a scalping opportunity in the AUDUSD, so I short the AUDUSD at 0.9358.

However, as I continued to observe the technicals, the push down didn’t seem convincing, so I decided to square the position at 0.9335 for a meager 23bps trading profit.

Trade: Bought a 1 month AUDUSD Put Option expiring 22 November 2013

I looked at the AUDUSD, felt that it is too strong given, the weak economy, structural weakness, impending inflation and poor job numbers.

I decided to BUY a 1 month Put Option on the AUDUSD, strike at the money spot of 0.9640, expiring 22 November 2013, premium of 107bps and breakeven of 0.9533.

I am looking at a 1:1 payout at 0.9425 and a possible 2.24:1 payout at 0.9293.  Let’s not forget that it was barely three weeks ago that the AUD was at 0.9280.  I believe the likely outcome would be about 1.6:1.  We’ll see.

Trade: Short GBPUSD

I was watching the screen and at about lunch time, I noticed the pound starting to slide.  I quickly looked at my charts and I noticed that the stochastics were turning down, the ichimoku; tenkan had just the kinjun from the top down, and the price trend broke through the cloud.

I confirmed it at both the 15 minute and 5 minute time frame……………looked really good, so I short the GBPUSD at 1.6230 with a SL at 1.6250.  The pound started a slow grind downwards and at about 330pm, an hour before the MPC and BOE minutes at 430pm, I decided to square the position and bought back the pound at 1.6155 for a 75bps pop!

Trade: SHORT USDJPY

I placed as SHORT USDJPY stop if bid at 98.00 when the spot rate was at 98.33.

When the weaker non farm payroll number came out the JPY strengthened to 97.87.  My order was filled at 98.00 and I squared the position at 97.90 for a trading profit of 0.10.

Trade: Short GBPUSD

Who really knows what the non farm payroll number is going to be; could be stronger or weaker.

I did three spot trades; the first one was going LONG EURUSD, going SHORT GBPUSD, and then going SHORT USDJPY.  All three trades were placed on a stop if offered or bid.

In the case of the GBPUSD, I was hedging against a possible stronger non farm payroll number, so I SHORT GBPUSD stop if bid at 1.6100 when the spot was at 1.6131.

As we all know, when the weaker non farm payroll number came out at 148K versus expectations of 180K, the USD got clobbered and the GBPUSD when up to 1.6200.

Trade: Long EURUSD

I was betting on a poor showing of the non farm payroll and so placed a LONG EURUSD stop if offered at 1.3690 when spot was trading at 1.3675.

When the weaker non farm payroll number came out,  the spot shot passed my order and my trade was executed.  I then squared my spot position at 1.3734 for a 44 bps trading profit.