what a nonsense. Each big fx option trade and subsequent hedge or larger cash position is reflected on the tape. Give or take some pips, depending which price feed you are looking at you see exactly the same big orders that sometimes move markets when liquidity is not at its hight than what you see in the index futures or commodities futures markets. So your argument is pretty flawed imho.
FX Vs. Stocks, Futures, Etc....
- Thread starter T-Bone Trader
- Start date
True, however that risk is simply shifted to time and also liquidity risk (options are less liquid than the underlying spot markets)
If you don't like time risk you can hedge your theta with a butterfly or by selling an iron condor. The beauty is that you can move the risk to where you want it. You aren't ever going to trade without taking any risk, it has to go somewhere.
I agree options are less liquid (even that liquidity varies greatly based on which options your are trading), but closing your position does not always require that you make another trade. Expiration is another way out.
Also, regarding manipulation risk, central banks manipulate their currency all the time. That's arguably the biggest type of manipulation there is in any market.
Hi,
Is there a way to get rid of all the theta risk?
In terms of manipulation it is still much harder to do this in fx. Stocks are MUCH easier to manipulate... all you need are a few million to push the small caps around. The CB of Britain recently required 300 million to put a bottom in the GBP and even so it kept droping.
Depends on your time frame, short term theta isn't a big risk. Long term, you can take advantage of the accelerated time decay of front month options by buying long term protection and opening long theta positions front-month to hedge the decay on the long term position.
It does take a lot more money to manipulate FX. That doesn't change the fact that the 300 million did move the market and prevent the decline somewhat. Small caps are easy to manipulate in stocks, but I don't trade small caps
. And I don't suggest that anyone does, there's too much risk there for me.
It does take a lot more money to manipulate FX. That doesn't change the fact that the 300 million did move the market and prevent the decline somewhat. Small caps are easy to manipulate in stocks, but I don't trade small caps
. And I don't suggest that anyone does, there's too much risk there for me.Nobody claimed one was harder to trade than the other.
They're all the same, with only subtle, nuanced differences.
If you are an experienced scalper...
And especially if you are well automated...
The fragmented Forex universe plus ETFs...
Is like a candy store for a Quant.
But your margins will be slim...
Like $100 net per $1 million traded.
Conversely...
Forex is hopeless for inexperienced, no infrastructure dudes...
Or mooks pounding sand with TA and charts.