Saxo Bank

[atticus]

Quote from canadaguy:

Finally, i find an explainatin about what i am experisnicine in my saxo demo account...


I use the folloiwng strategy to see if i can capture rollover interset, risk free (well, close to it)...

I buy 20 contracts of say the NZD/JPY
then, I sell 20 call contracts against position using the same strike price as I
paid for the spot position...I use the premium gained from the sale of the calls and buy 20 put contracts again using the soot strike price...

result? no matter what happens to the underlying my margin positino is essentially untouched...the underlying ca drop 500 pips and nothing will hppen...

what i did notice is when the spot price
felll the put option price offered would be less than the intrinic value so it wouldn't make sense to close it out...i just wait until expiry and get paid the proepr spread between my contract pr4ice and the spot as of 10:00 am. new rok time...

my purpose in doinng this is to capture the rollover interest but the demo version of saxo trDer doesn't seem to show what you receive on rollover interst..

any comments or questions are welcome

You're trading the conversion. The profit is a function of a positive value on the following: strike + call - [put +/- geared-swap to expiration]. The swap value will be [-] for a short swap and [+] for a long swap. Realize that the swap is embedded in the option; the call is discounted to the put = the swap if the position is +carry. The 1m atm GBPJPY vanilla straddle is currently quoted:

214.35
C = 3.20 mid
P = 4.30 mid
Swap = 1.10 or 110 pips

There is no arb as the premium received to finance the strike is equivalent to the spot swap held to expiration. If not, you could isolate the swap with no risk.

You're locking in a loss equal to the spread paid/received off Saxo's mid + comms. I'd recommend against doing that again.

 

[canadaguy]

Quote from atticus:

You're trading the conversion. The profit is a function of a positive value on the following: strike + call - [put +/- geared-swap to expiration]. The swap value will be [-] for a short swap and [+] for a long swap. Realize that the swap is embedded in the option; the call is discounted to the put = the swap if the position is +carry. The 1m atm GBPJPY vanilla straddle is currently quoted:

214.35
C = 3.20 mid
P = 4.30 mid
Swap = 1.10 or 110 pips

There is no arb as the premium received to finance the strike is equivalent to the spot swap held to expiration. If not, you could isolate the swap with no risk.

You're locking in a loss equal to the spread paid/received off Saxo's mid + comms. I'd recommend against doing that again.



Thanks very much for the information...clearly set out for me...

Would your analysis of potential profitabliyt change if I told you that the premium paid for the long put was no more than I received for the short call? Essentially making the covereed call/long put a zero sum cost...

Thanks.

 

[atticus]

Quote from canadaguy:


Would your analysis of potential profitabliyt change if I told you that the premium paid for the long put was no more than I received for the short call? Essentially making the covereed call/long put a zero sum cost...

Thanks.

No, as you lost money over simply closing the spot position. Any synthetic traded at Saxo is traded at a > loss of edge over the simple spot-offset.