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FX short to mid-range frequency discretionary trading
- Thread starter amazingIndustry
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Taking a eur long @ 1.2242 , stop at 1.2220.
Avg gain 120 pips. Not the firework I expected but got 1/3 out at pretty much the highest levels so far. Not bad for couple hours of work. (and thanks to Atticus I decided I did not want to shame myself twice within days ;-) Joke aside, it was my battle plan to sell the facts and it worked.
Not as good though as someone who may have sold anywhere near 1.2370 levels and being up 100 pips within 10 minutes as we speak.
I was too reluctant to stage a full scale short, for now I will stay on the sidelines and listen in on the Q&A session to get a better understanding what this all entails. So far, it looks disappointing to me...more later...
Not as good though as someone who may have sold anywhere near 1.2370 levels and being up 100 pips within 10 minutes as we speak.
I was too reluctant to stage a full scale short, for now I will stay on the sidelines and listen in on the Q&A session to get a better understanding what this all entails. So far, it looks disappointing to me...more later...
Quote from amazingIndustry:
Taking a eur long @ 1.2242 , stop at 1.2220.
Credibility sliding big time, is all I can say about Draghi's performance yesterday. I think he just traded in his credibility for saving his bullets for rainier days. Problem here is that a central banker without credibility is utterly worthless.
After much contemplation I can only conclude that it was not his choice to withhold every and all details of how he intends to stabilize sovereign yields. I think it was another attempt at bluffing Merkel and Germany into folding against incredibly weak hands. This time it did not work out, though. The other Mario (Monti) must have shared his moves with Draghi and how he trumped out Merkel at the EU summit. Last week Draghi announced bold steps just after Merkel left into her summer vacation WITHOUT coordinating with those country heads (aka Germany) that are supposed to stem this crisis and pay for everyone else. It did not work out. German power brokers must have been furious last weekend and I think they just clipped Draghi's wing . There is no other explanation to this. First, no central banker in the world, at least not of Draghi's caliber (really, he is ex Goldman...???) can be so stupid in believing they can promise bold moves to the market and utterly disappoint a week later without consequences...No way. Secondly, Draghi's displeasure with Weidman was felt very clearly, he referred to him several times during the press conference and made sure to let the world know how isolated he felt Weidman was with his views of how to step up to the plate. Ergo, it seems very clear to me that he was called back by some very powerful players in this game.
Trading in this market has just become again a level more complex and harder. We will now suck up each and every little economic release from one week to the next playing the guessing game of which central bank will make its move first and when.
Trying times to be a macro trader. But this is not the first time in my career, it pays to run my own shop, to not have any pressure whatsoever other than my fiduciary duty to my investors and my own pockets. I would never take on clients who demand turn over of investments even if I preferred to stay in cash. I do not even charge management fees, my incentive structure is perfectly aligned with my investors' interests and I think it comforts them as well. For me this week is done, I eked out a bit of pnl after having passed up 240 pips of profit last week and another 100 pips earlier this week.
TGIF, will hit the beaches this weekend at nearby Izu-peninsula (2 hours from Tokyo). Have a good weekend everybody.
After much contemplation I can only conclude that it was not his choice to withhold every and all details of how he intends to stabilize sovereign yields. I think it was another attempt at bluffing Merkel and Germany into folding against incredibly weak hands. This time it did not work out, though. The other Mario (Monti) must have shared his moves with Draghi and how he trumped out Merkel at the EU summit. Last week Draghi announced bold steps just after Merkel left into her summer vacation WITHOUT coordinating with those country heads (aka Germany) that are supposed to stem this crisis and pay for everyone else. It did not work out. German power brokers must have been furious last weekend and I think they just clipped Draghi's wing . There is no other explanation to this. First, no central banker in the world, at least not of Draghi's caliber (really, he is ex Goldman...???) can be so stupid in believing they can promise bold moves to the market and utterly disappoint a week later without consequences...No way. Secondly, Draghi's displeasure with Weidman was felt very clearly, he referred to him several times during the press conference and made sure to let the world know how isolated he felt Weidman was with his views of how to step up to the plate. Ergo, it seems very clear to me that he was called back by some very powerful players in this game.
Trading in this market has just become again a level more complex and harder. We will now suck up each and every little economic release from one week to the next playing the guessing game of which central bank will make its move first and when.
Trying times to be a macro trader. But this is not the first time in my career, it pays to run my own shop, to not have any pressure whatsoever other than my fiduciary duty to my investors and my own pockets. I would never take on clients who demand turn over of investments even if I preferred to stay in cash. I do not even charge management fees, my incentive structure is perfectly aligned with my investors' interests and I think it comforts them as well. For me this week is done, I eked out a bit of pnl after having passed up 240 pips of profit last week and another 100 pips earlier this week.
TGIF, will hit the beaches this weekend at nearby Izu-peninsula (2 hours from Tokyo). Have a good weekend everybody.
Boy, what a wild ride last Friday, and strong opening today so far. Someone belittled me last week for even setting the 1.25 mark as target and here we are at 1.2440, a day late but nonetheless. So much to smart options players who attached 15/100 to the 1.25 touch. Not that I think it was mis-priced but I just want to take this opportunity to point out the core difference between options plays and pure delta plays. Nobody sane in their head should buy far otm optionality unless he has inside information simply because more often then not the options are relatively efficiently priced.
Even with a strong track record of expressing views on direction the probability of being wrong generally makes paying the theta more expensive than the probability of being right and riding the occasional rally/crash off the back of delta and gamma exposure. I would never buy a 100/15 unless I was convinced the option was grossly mispriced. However, I would very much buy the outright delta with a target equal to the touch level, given I have a very strong view on direction. One reason could be that I believe the market supports at the very least current levels, meaning even it never gets to my target I do not lose a penny vs. the price to pay to be long optionality. Secondly, spreads are far wider on the options side because of their lower liquidity. I pay generally 0.3 pips on the spread and another 0.2-0.3 pips in commission to trade the outright delta in eur. No otc, no listed options would ever get me this cheaply in and out of a trade. The options do not price in the inconvenience and cost to turn around positions a multiple times.
Thus, I stand by my view I expressed last week, but I openly admit I played it pretty badly. Missed the strong selling pressure post ECB press conference and also the rebound later on. Anyone seeing parallels to the crazy volatility we have seen September, October 2008?
Well, new week new opportunities. Let's go get 'em tiger...
P.S.: May I add my read of ECB sentiment after having combed through all the news pieces: I believe the ECB is trying to play a game of chicken here. I sense a strong move towards intervention but the new game in town is the justification for such intervention. Before it was about volatility in the markets ECB attempted to tame, Germany said: NO! Then it was about Greece, then Spanish and Italian yields, Germany said NO! The reasoning for the opposition was that ECB's mendate was not to support market levels of individual nation's bond markets or equity markets. Well, why not just inventing a reason that lies within the ECB mendate that would give it all the justification to do whatever it wants? Here it is:
The newest story is that the ECB needs to defend the Euro and the stance of the non-reversibility of the Euro. Thats why they need to support sovereign spreads. LOL, anyone find that funny with the Euro trading at 1.24 levels against the dollar? First of all, a cheaper euro can only be good for European exports, secondly we are still far away from parity levels where markets would seriously start to question when the currency will be taken off the market and national ccys will be re-introduced. The market doubts the whole Euro experiment because their is no fiscal union behind backing it up, thats the ONLY reason people have no faith in the euro.
Even with a strong track record of expressing views on direction the probability of being wrong generally makes paying the theta more expensive than the probability of being right and riding the occasional rally/crash off the back of delta and gamma exposure. I would never buy a 100/15 unless I was convinced the option was grossly mispriced. However, I would very much buy the outright delta with a target equal to the touch level, given I have a very strong view on direction. One reason could be that I believe the market supports at the very least current levels, meaning even it never gets to my target I do not lose a penny vs. the price to pay to be long optionality. Secondly, spreads are far wider on the options side because of their lower liquidity. I pay generally 0.3 pips on the spread and another 0.2-0.3 pips in commission to trade the outright delta in eur. No otc, no listed options would ever get me this cheaply in and out of a trade. The options do not price in the inconvenience and cost to turn around positions a multiple times.
Thus, I stand by my view I expressed last week, but I openly admit I played it pretty badly. Missed the strong selling pressure post ECB press conference and also the rebound later on. Anyone seeing parallels to the crazy volatility we have seen September, October 2008?
Well, new week new opportunities. Let's go get 'em tiger...
P.S.: May I add my read of ECB sentiment after having combed through all the news pieces: I believe the ECB is trying to play a game of chicken here. I sense a strong move towards intervention but the new game in town is the justification for such intervention. Before it was about volatility in the markets ECB attempted to tame, Germany said: NO! Then it was about Greece, then Spanish and Italian yields, Germany said NO! The reasoning for the opposition was that ECB's mendate was not to support market levels of individual nation's bond markets or equity markets. Well, why not just inventing a reason that lies within the ECB mendate that would give it all the justification to do whatever it wants? Here it is:
The newest story is that the ECB needs to defend the Euro and the stance of the non-reversibility of the Euro. Thats why they need to support sovereign spreads. LOL, anyone find that funny with the Euro trading at 1.24 levels against the dollar? First of all, a cheaper euro can only be good for European exports, secondly we are still far away from parity levels where markets would seriously start to question when the currency will be taken off the market and national ccys will be re-introduced. The market doubts the whole Euro experiment because their is no fiscal union behind backing it up, thats the ONLY reason people have no faith in the euro.
Probably a really stupid question but which broker do you use to view your FX option prices? I'm just wondering how you're able to see the option premium as being 0.3 pip as opposed to a specific dollar price (unless you converted it yourself)
edit: never mind, I see you mean the 0.3 pip as being the spread for your FX spot position.
edit: never mind, I see you mean the 0.3 pip as being the spread for your FX spot position.
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