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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.

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.

Thoughts: Possible 1 month GBPUSD Put Option

Strike at 1.5660, breakeven at 1.5506and premium is 149bps.

61.8% ~ 1.5751

50% ~ 1.5587

38.2% ~ 1.5424, difference is 82bps and payout is 0.55X

0% ~ 1.4894, difference is 612bps and payout is 4.1X

Thought: Overview of the FX market

EURUSD

———–

The EURUSD is currently trading above the 61.8% level of 1.3321, the 76.4% is at 1.3437 and the 100% is at 1.3640 established on 1 February 2013.

Last night’s high was at 1.3385and the low was at 1.3282.

 

GBPUSD

———–

The GBPUSD is presently trading above the 61.8% level of 1.5754 with the 76.4% at 1.5957 and the 100% at 1.686 established on 21 December 2013

Last night’s high was at 1.5723 and the low was at 1.5650.

 

AUDUSD

————

The AUD is a currency that really begs to be thrashed.  The current spot is trading below the 0% level of 0.9671, the 23.6% is at 0.9891, 38.2% is at 1.0027 and the 50% at 1.0137.  How much will it take to drive the AUDUSD to the 50% level, I don’t think alot.  Home loans is down, consumer sentiment is down, however, employment is up and unemployment is down.

Let’s look at this more closely.

 

My hunch tells me that there is opportunity in the following: –

Call option on the AUDUSD

Call option on the USDJPY

Put option on the GBPUSD

Right now, we need to do a cost benefit analysis to determine which strategy is cost efficient and profit effective.

 

Post Carnage from last night

eurusd 7 june 2013

 

gbpusd 7 june 2013

After last night’s spectacular moves by the EUR and GBP averaging more than 190bps, the current spot is at the 50% retracement level.  The market can now make very violent swings given the current volatility.

While I am of the opinion that the non farm payroll numbers will probably disappoint given the earlier poor showing of the ADP numbers, we are going into Spring and the start of new job placements.  On the off chance, that the non farm payroll numbers coming in stronger than forecast, we should see USD powering back against the EUR and GBP.

Volatility in equities and forex are high right now, and hedging through the options or CFD market is very expensive.

If one is being prudent to potentially capture either the upswing or downswing, buy a call/put spread option would be a safe bet, as one would WIN either way.  However, the cost of the spread option till Monday 10 June is a hefty 114bps.  So is it worth it?  NO.

Which means, one will have to take a gamble on one side.  My advice is to place a stop loss as it is our only protection.

I am deciding to stay out of the market today and instead, spend time with my wife going to the spa and a nice dinner.

Here’s wishing all of you a great weekend.  Remember, in the forex market there is always another day of opportunity, so if you don’t feel comfortable…….don’t push yourself.

 

Trade: Bought Put Option on the AUDUSD at 0.9950, BE at 0.9905 expiring 17 May 201

We sold the put option at about 4:15pm Asian time on Friday at 0.9730 for a awesome 175bps profit or 1.80%.

Thank you Julia Gillard and Glen Stevens!