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?
The Panthenon Investment Group 