riskarb's trading journal
- Thread starter riskarb
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Yo riskarb -
Me and you are gonna have to figure out how to divide the fx world into two someday.!
A trillion each way, what do you think?
Me and you are gonna have to figure out how to divide the fx world into two someday.!
A trillion each way, what do you think?
Well decided to take the plunge into boxoptions by Oanda. The strategy is essentially to buy up boxes with high payouts then hedge using spot so that when box is hit loss of box price=gain in hedge. Of course i also need to have a stop loss so that (payment-price)=hedge loss. So the idea is to put in such positions when I determine that the rate will stay between a certain trading range (with the goal of creating as wide of a trading range as possible which is directly dependent on obtaining fat payments). The risk is that the rate will hit the stop loss on the hedge and then bounce and hit the box resulting in a loss of the payment of the box.
Don't know how stable a strategy like this is and will try this out on some play money for a month to get a hang of it before going in with some risk capital.
Any comments on such a strategy?
Don't know how stable a strategy like this is and will try this out on some play money for a month to get a hang of it before going in with some risk capital.
Any comments on such a strategy?
It's one of my primary strategies in FX over the last two years. The strategy is essentially a synthetic straddle that inverts modality as you approach the strike, morphing into a up and out call[reverse]. The "flip" changes w.r.t. time and vol; so it's difficult to model. Probably the most difficult of the conventional exotic positions to model under the life of the position.
Also, you still need to be right on direction. Hedge losses can be large if you solve for strike risk and are wrong on direction[strong hedge]. Wrong on mag and you lose on the reverse-call[weak hedge]. One could write a book about the subtleties. Good luck, and feel free to run stuff by me in email or IM. Misery loves company.
I was going to move a corp account with >$500k, but in the end decided to limit it to personal accounts. There are limits to box positions. I ran into limits when sizing >$50k in box options. Not much of a concern for most.
The blotter issue was fixed within minutes and I was contacted re: the issue before I had a chance to contact Oanda. They contacted me after reading my message board thread.
My only issue related to trading involved the EURJPY and a box hit on one Sunday. The pair traded lower by 25 pips, which was not supported by GTIS or EBS feeds. They wouldn't correct the erroneous fill, but I've taken enough out of their pockets to render that a cost of doing business. Best to stick to the majors, or at least be mindful that any box within 20 pips is in imminent risk.
In their defense; my largest $win was a miss box in which spot trade to within a fraction of a pip of the box. I was sure it had hit, but as it turns out it missed by something like .00005. This trade was worth 5-figures.
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