Option replication and exotics journal

[riskarb]

Quote from riskarb:

Quote from riskarb:

Long 7mm units GBP/JPY at 212.64 [$580 USD current pip value]



Sold 2mm units at 212.73 -- 5mm units remain against the 215.20 no touch. +$5,200

Sold 5mm units at 211.14... no spot position. $82,400 net loss on spot. 215.20 barrier will go unhedged.

 

[riskarb]

Jesus... GBP/JPY just dropped 100 pips in 5 minutes.

 

[mahras2]

Tell me about it. Everything is moving and at THIS hour. Heck all the pairs my systems trade (eurusd, audnzd, audjpy, gbpchf) are moving. Diversification my arse lol.

 

[riskarb]

Yeah, it's crazy. Nikkei dropping 250... I'm shorting US index with both hands.

 

[Sammy Iyer]

Wow!
Your original 7mm spot long of GBP/JPY @212.73 took the risk of profit/loss as per the movement of GBP/JPY which you have closed out now at a loss.
.But still 215.2 No touch bet may salvage the losses if GBP/JPY keeps falling or does not reach the barrier right?
I have heard Banks eat a bit of spread carry interest & pass to you the balance.
NZD/USD=Long +2.5% ,Short -3.5%
GBP/JPY=Long +3.5% ,Short -4.5%
NZD/JPY=Long +4.5%,Short-6%
some thing like that?

Another Scenerio: What if GBP/JPY reached say 217 on expiry day? You loose the One touch premium but ride the long profits +carry interst right?

Thanks

 

[riskarb]

Sammy -- no spot interest beyond what I earned yesterday, which wasn't much. I've got the full debit risk on the barrier.

 

[Sammy Iyer]

Quote from riskarb:

For convenience and ease of reading I will define a USD pip value with each trade.

Long 7mm units GBP/JPY at 212.64 [$580 USD current pip value]

GBP/JPY 215.20 no touch
Premium: $188,600
Payout: $302,100 [includes prem paid]
Expires: Dec 30, 2005

Position earns $149,000USD on spot if the no touch barrier is reached, or an approx net-position [loss] of [$39,000USD] before interest carry.

I see that You have already answered my question some what on P&L at barrier.
Since USD fluctuates,Kindly quote the PIP value,premium,pay out ,P&L,+ve over night Carryinterest in the currency
pair played as it is easy to imagine R/R rather than USD.
Regards-Sammy

 

[Sammy Iyer]

Quote from riskarb:

Sammy -- no spot interest beyond what I earned yesterday, which wasn't much. I've got the full debit risk on the barrier.

Hi Risk Arb
2pm here & I just having lunch at my desk.
USA 1AM (EST) or 10PM (Pacific)--You are Burning mid night oil watching Nikkei I suppose!
Thanks for your instant reply.

 

[Trend Fader]

Riskarb.. whatever happened to this gbp/jpy trade.. the pair blew up?

 

[riskarb]

Yeah, I hated being in it at 21260. I had to dump the remaining spot when it traded to 11s. We're at 07s now and I am tempted to buy, but I won't. The upside barrier is 800 pips otm, trading at $250k.

I am going to run a carry matrix and reduce the exotics on fx. Stat vols are > implied vols by a wide margin, not good for selling gamma. Sorry guys, but that's the last fx carry/exotic for a little while.