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Tag Archives: foreign exchange

Trade Update: 1 month GBPUSD Put Option expiring 18 October 2013

Markets were just see-sawing back and forth, when I was the opportunity on Friday night, actually it was already Saturday morning at about 1:30am Singapore time.

I saw on the technicals moving back up from the trough; fast and slow stochastics cutting up from below, Chikou flattening out, so I took on my gut feel and sold the option at 1.5933.

Remember our breakeven was 1.5990, that gave me a trading profit of 57bps.  You will recall that I wrote an update on October 9th and made the decision to hang on to this option trade alittle longer.  Well, the Ichimoku is telling me that this trade has run its course.  The payout wasn’t great, a meagre 0.45:1.  Let’s not forget that this option cost me 125bps in premiums.

The lesson learnt here is that the markets are getting tougher and more dangerous!  As traders, we are taking on more risks, in this case, paying more for options and the potential payout is not commensurate to the risk we are taking.  Why?  Volatility is high.

When I woke up on Saturday morning and checked what happened in the NY afternoon session and closing……….Wow!  By closing of the NY session, the Tenkan has firmly cut up the Kinjun from below, it broke through the cloud from below and also went above the 200 day MA.  So, in hindsight it was good that my gut feel prompted me to take profit on the option…………..whew!

Trade Update: 1 month put option GBPUSD expiring on 18 October 2013

You will recall that I bought another put option on the GBPUSD at the strike of 1.6115, with a breakeven of 1.5990 and premium cost of 125bps.

I really thought we were going to lose on this option as well.  Lady Luck has decided to show her beauty, the GBPUSD and the EURUSD has did an about turn southwards starting today and the current spot is now at 1.5938, so I am 52bps in the money.

Should I take profit now or wait it out alittle longer?  The political turmoil in the US surrounding the coming debt ceiling deadline on October 17th is so so unpredictable.  Should I just take profit, since, it is on the table or wait?

The 4H chart shows that the Tenkan cutting down on the Kijun, and we are now below the cloud.  The cloud is declining and so the is Chkou.  We are near the 200 day MA of 1.5873.

Decisions…………decisions………….decisions………….however, based on the technical analysis alone, I will stay with the option for alittle longer, but I am going to be following the news like a ‘hawk’.

Tonight’s FOMC minutes at 2am Singapore time and 2pm NY time, may take away support from the USD, as the Fed didn’t taper like what the markets were expecting in the last meeting.  However, if the minutes shows that the Fed is sensitized to the economy and wants to make sure it’s growing from strength to strength which is isn’t right now, then, it should be positive USD.

Trade Update: 1 week put option on the GBPUSD expiring 27 September 2013

Well, September 27th rolled around and the GBP was up up up, moving from 1.6030 to 1.6100.

You will recall that I bought a put option at the strike of 1.5915 and a breakeven of 1.5826.  The premium was 88bps.

I let the option lapse and I made a trading loss of 88bps, which is the cost of the option.

Trade Update: I month Put Option on the AUDUSD expiring 18 Oct 2013

On September 30th, I saw AUDUSD coming down to 93.00 and at the same time I felt that the floor was reached even though it pushed down to 0.9290.

I decided to sell the option and locked in the trading profits of 100bps.  Remember our entry point was 0.9500 and our option cost was 100bps which put our breakeven at 0.9400.  Essentially, it was a 1:1 payoff, though my preliminary calculations, I was betting on a 2:1 payoff, however, AUD all of a sudden became the safe haven currency because of the partial US government shutdown and also the overhanging debt ceiling deadline on October 17th.

At the same period, the EUR and GBP was rallying against the USD, which doesn’t bode well for the other put option I did on the GBPUSD.  I will give and update shortly.

Trade: 1 month Put Option AUDUSD expiring 18 October 2013

Again, I felt that the strength in the AUD was unwarranted given the state of its economy compared to the US.  However, I also respect that the AUD is a safe haven currency and also because of the positive carry trade.

However, when the Ichimoku; Tenkan cut down on the Kinjun from the top at 0.9500, I decided to Buy a Put Option for 1 month at the money spot, breakeven at 0.9400 and a premium of 100bps.

Trade: 1 mth GBPUSD Put Option expiring 18 October 2013

I felt that the majors thrashing of the USD was overdone post FOMC and when the Ichimoku; Tenkan cut down on the Kinjun from the top at 1.6115, I decided to Buy a Put Option for 1 month at the money spot; premium of 125bps, breakeven at 1.5990.

Trades done just prior to FOMC

I was watching the fx rates the 15 minutes prior to the 2am FOMC announcement, rates were holding steady in a very tight 5 bps range.

While it is near impossible to guesstimate what Bernanke is going to do, the general consensus in the marketplace is that he will make some ‘light’ tapering so as to follow through with what he has been saying the past two months.

I placed a total of 4 trades: –

AUDUSD  –  Buy Stop if Offered at 0.9388, spot was 0.9368

EURUSD  –  Buy Stop if Offered at 1.3395, spot was 1.3372

USDJPY  –  Sell Stop if Bid at 99.10, spot was 98.85

GBPUSD  –  Sell Stop if Bid at 1.5950, spot was 1.5971

Then at 2am, Bernanke shocked the financial markets with ZERO tapering!  All the majors jumped against the USD, I was triggered on my AUDUSD and EURUSD.

I squared the AUDUSD at 0.9460 and the EURUSD at 1.3455 when I saw that the momentum was flattening out, then again, half an hour later, the majors resumed their torture on the USD.  Trading profit on the AUD was 72bps and on the EUR it was 60bps.

Today, Asian afternoon and London morning, AUDUSD is at 0.9507 and EURUSD is at 1.3567.  Oh well, one can’t capture the maximum move, I am happy with what I made in 15 minutes last night.

I was out playing golf this morning and got home early afternoon.

Option Trade: Bought GBPUSD Put Option expiring 27 September

Today, I bought a GBPUSD Put Option expiring 27 September 2013, at the strike of 1.5915, breakeven of 1.5826, premium of 88bps.

We are 100bps higher because of Summer’s exit from the running for the Chairmanship of the Federal Reserve.  Inspite of the recent better economic data, I believe the UK cannot afford to bear with the current exchange levels as it may prove to be rather painful and counterproductive to the economic growth for the country.

Let’s not forget that only on September 2nd, the GBP was trading at about 1.5550.

The 76% retracement level based on the 4H chart is 1.5692, this is about 134bps from the current spot rate and against the cost of the option, it is a 1.52X payout probability.

Performance Review of June 2013

The month of June was a busy month, I did 9 trades and two options.

I lost on two trades and nearly loss big time on the EURUSD call option but managed to recover and actually made a profit.  You will recall that the two month EURUSD call option had a breakeven of 1.3175 and expiration on 28 June 2013.  I squared at 1.3268 and it hit a high of 1.3365 just before expiration.

The yum yum trade was the 2 week USDJPY call option.  I just felt the JPY strengthened too much too quickly and a significant correction was going to happen.  So I bought a call option at 94.15 with a breakeven at 95.86 and I bought back the option at 97.50 for a nice profit of 16.8%.

So for the month of June, I am up 33.3% in absolute returns.  So far, YTD trading profits in absolute is 136.7% with this month’s trading profits, it brings the absolute returns year to date to 170%.

2 week USDJPY Call Option executed on 13 June 2013, expiring 28 June and squared on 21 June 2013

I bought a 2 week call option on the USDJPY at the strike of 94.15 and breakeven of 95.86, that is, 1.71bps for the cost of the premium which is pretty expensive as volatility was high.  However, my technical analysis plus the news out of Japan and Abenomics, I was confident that the yen would weaken.

I bought back the option on the last day at 0.9750 for a nice trading profit of 16.8%.