Turkish Lira (TRY)

Saltynuts said:
thanks m22au. So, buy USD/TRY at my broker. Is that different than me just holding my assets in USD in the first place, as they are inherently long US $ short TRY? If it is, is there a certain name for the USD/TRY product or thing? Maybe just currency pair?

no idea on the interest. but if the interest spread i pay is lesser than the amount by which the lira depreciates via the dollar, i shouldnt care too much right?

thanks!
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Yes, buying USD/TRY is different to holding your assets in USD. The latter does not involve any sales of TRY.

The name for USD/TRY is a currency pair.

You are correct that if the TRY depreciates by more than the interest differential, you will have a profitable trade. However what if the interest rate is 10% or more? Are you sufficiently confident about the future depreciation of the TRY?

What if the central bank raises interest rates to 15% or 20% or 50% ?

.
 
truetype said:
Or you can just buy puts on TUR, which will follow TRY lower if your thesis is correct.
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It probably will - but this is adding two extra layers of complication.

First, the TUR correlation with USD/TRY is not 1.

Second, buying puts involves paying premium which decays over time.

.
 
m22au said:
It probably will - but this is adding two extra layers of complication. First, the TUR correlation with USD/TRY is not 1. Second, buying puts involves paying premium which decays over time.
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No, the correlation isn't 1. Did I say it was? But if TRY crashes, so will TUR. Re 'paying premium,' yes there's 'decay,' but there's also movement in the underlying. That's why options are worth money. Anyway, most US retail investors don't have a way to play TRY directly. TUR is close enough for government work.
 
m22au said:
Yes, buying USD/TRY is different to holding your assets in USD. The latter does not involve any sales of TRY.

The name for USD/TRY is a currency pair.

You are correct that if the TRY depreciates by more than the interest differential, you will have a profitable trade. However what if the interest rate is 10% or more? Are you sufficiently confident about the future depreciation of the TRY?

What if the central bank raises interest rates to 15% or 20% or 50% ?

.
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Haha, I dunno m22au, have central banks ever raised rates as high at 50%? But if they did, wouldn't that literally crush their economy very, very quick, meaning you might want to short the heck out of it?
 
Saltynuts said:
Haha, I dunno m22au, have central banks ever raised rates as high at 50%? But if they did, wouldn't that literally crush their economy very, very quick, meaning you might want to short the heck out of it?
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In early May, Argentina raised their interest rate to 40%
"Argentina raises interest rates to 40%"
http://www.bbc.com/news/business-44001450

While this is less than 50%, the point still stands - central banks can tighten monetary policy severely, which can cause losses for those betting against the currency.

Saltynuts said:
you might want to short the heck out of it?
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Short the heck out of what?
 
m22au said:
In early May, Argentina raised their interest rate to 40%
"Argentina raises interest rates to 40%"
http://www.bbc.com/news/business-44001450

While this is less than 50%, the point still stands - central banks can tighten monetary policy severely, which can cause losses for those betting against the currency.



Short the heck out of what?
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Yeah, and Erdogan is so radically against raising rates, you think he'll allow an interest rate hike of that magnitude?
 
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