Quote from kalashnicac:
Hi risk,
Glad to see the exotic journal is back, I missed it.
I wanted to react to what you were saying about barriers being defended.
I trade currencies (FX), mainly swing trading but I sometimes make a few intraday trades. One thing I noticed was that there were barriers being defended all over the place (my broker gives me info about them). Apparently, an increasing number of options on FX are exotic.
So, based on that kind of info (or the rumour), it really becomes easy to anticipate these intraday swings, that generally take out the barriers-I've seen it happen a number of times. A good strategy would be to place a no touch just beyond the barrier being defended, because they are often hit, hedge strongly into them and offload the hedge as the barrier is hit. If you are lucky your own option will not be hit, so that you make money on your hedge and your no touch. Haven't tried this, just an idea based on observation.
In your former exotic journal you did a few FX trades with exotics; it seems to me that that is the kind of market you're looking for if you want to cash in on barrier defending.
FX is the largest exotic market which comes as no suprise. The no touch barrier defense has the advantage of potential gaps through the barrier which offer potential hedge gains if traded strong. Also, a strong hedge to a no touch can be offset during the barrier defense in hopes of a reversion. I mentioned the DB-barrier defense in an earlier post on this thread.
