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Tag Archives: put option

After ADP superby performance of 253K versus forecast of 181K, Wall Street and Main Street were anxiously awaiting NFP tonight.

Then again, there were many times when NFP surprised us all with a weaker number.

I decided to play my straddle to capture the market either way: –

Bought a EURUSD Put Option expiring Monday, June 5th; Spot 1.1215 and B/E 1.1189

Bought a USDJPY Put Option expiring Monday, June 5th; Spot 111.59 and B/E 111.26

As it turned out, the NFP number came in considerably weaker at 138K versus forecast of 181K and previous month was also adjusted lower.

The EUR strengthened agaisnt the USD, so my put option was useless.

However, the JPY strengthened against the USD and put my USDJPY put option into the money.

I decided to square the USDJPY put option at 110.57.  It was sufficient to offset the cost of both the options and left me with a decent 36 bps trading profit.

I believe Draghi is going to starting reining in QE as he kind of hinted in his last press conference.

However, because of the Brexit, French elections, Greece and Italy, I can’t help thinking that he might end up also being alittle dovish.

So in truth, I believe he can go either way, but the volatility on the upside seem to be higher than the down side.

I decided to execute a double down call and put option spread with the following details: –

Spot; 1.0905

Call option; BE; 1.0948 with 43bps premium

Put Option; BE; 1.0879 with 26 bps premium

Total premiums; 69bps.

Let’s see what happens. I believe whatever happens tonight will translate into market action over the next few days.

It doesn’t help that it’s a long weekend upcoming up.

 

Volatility is low, so it’s increasingly more difficult to do intra day spot trades.

I felt the timing was more appropriate for options so decided to execute the following options: –

1 Month GBPUSD Put Option – Strike at Spot 1.2565, premium at 129bps and BE at 1.2436

1 Month USDJPY Call Option – Strike at Spot 108.85, premium at 1.43yen and BE at 110.29

Let’s see what happens.

Decided to take a small punt though I wasn’t exactly comfortable with the volatility.

A two day put option was 120bps, which means for every 1Million nominal option size, the cost is $12,000/-.

Nonetheless, decided to take a small position with the following details: –

2 Day Put Option

Option Amout: $2Million

Strike: 1.4862

Premium: 115bps

Breakeven: 1.4747

It’s gone crazy now!!!!

About half of the results are in and Leave leads by 3.5%, GBP plummets.

I decided to take profit on my option and sold the option five minutes ago at 1.3490 for a whopping 1,257bps or a payout ratio of 10.4:1!!!!!

I am out for the rest of the day! Thank you UK!

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…………

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.

 

Market was anticipating the much awaited non farm payroll numbers and the unemployment numbers to confirm that the U.S., is on track in its economic growth recovery.

Wednesday’s ADP number was not encouraging at 213K against forecast of 224k, however, it was mitigated by the upward revision of December’s number from 241K to 253K.  This means that there is a possibility that the non farm payroll numbers could surprise on the upside of forecast.

Market was steady at about 9:10pm Singapore time.  My hunch told me that the non farm payroll numbers would be better, so I decided to bet on my hunch.

Orders: –

1.  GBPUSD – Stop if Offered at 1.5290 when spot was at 1.5323

2. EURUSD – Stop if Bid at 1.1500 when spot was at 1.1486

3. EURUSD – Bought a put option expiring Monday, February 9 with a premium of 36bps, spot at 1.1486 an breakeven at 1.1450

4. USDJPY – Stop if Bid at 117.60 when spot was at 117.28

Of course, all of us knew what happened, the non farm payroll numbers came out at 257K busting forecast of 236K and the highest in the past 6 years.

Market sold off the GBP, EUR and the JPY in a BIG way!

At about 11:15pm, I decided to square off all the trades.

Squared off the GBPUSD at 1.5248 for a trading profit of 42bps.

Squared off the USDJPY at 118.88 for a trading profit of 128bps.

EURUSD stop if bid order was not triggered.

Sold off the put option at 1.1326 for a trading profit of 124bps.

In absolute terms, we made 294bps in totality for all 3 trades.

WHAT A NIGHT!  THANK YOU UNITED STATES OF AMERICA!

Ever since RBZ lowered its rates last month, speculation was building in the marketplace about whether the RBA would or wouldn’t lower its interest rates as well?

A week coming up to Ferbruary 3rd saw numerous analysis put out by Bloomberg, Reuters and of course, the banks.  Speculation that the RBA wouldn’t lower rates because it is concern about the high property prices and high cost of living.

Guess what?

At 11:30am, the RAB announced a 0.25% rate cut down to 2.25% from 2.50%.  Surprise surprise!!  Then again, I do not believe it was a surprise, however, none of us have a crystal ball, so he really can’t say for sure what the RBA was going to do.

However, my hunch was that it would cut rates because of mounting pressures.  So I placed a stop if offered level at 0.7765 when the spot rate was 0.7805, about 10 minutes before the announcement.  I also placed a stop if bid at 0.7835.  In addition, since my inclination was rate cut I decided to gamble with buying a put option at 0.7765 for one day with a premium of 35bps, expiring on February 4th 10am NY time.

When the announcement came out, the AUDUSD fell off the side of the cliff falling over 100bps within 5 minutes.

My stop if offered order was activated at 0.7770 and I squared the spot trade at 0.7659 for a trading profit of 106 bps.

I also decided to buy back the option and locked in another 100bps trading profit.

Thank you RBA, I secured a 206bps trading profit within 10 minutes of the announcement.

What a great start to the month of February.

So much talk leading up to today’s ECB rate decision and press conference.  I decided to to take a chance, it’s pure gut feel, I bought a put option for one day expiring tomorrow Sept 5 with a premium of 44bps, strike at 1.3150 and breakeven at 1.3106.

What a surprise!

The ECB announced cuts on the main interest rate and also went negative on the deposit rate, sending the Euro crashing, I just squared off the trade at 1.3026 and was happy with a 80bps profit.

This is the trade all of us have been waiting for!