USD Yuan options

[MacroAlex]

My mistake. You are correct. oops: I actually worked in that pit for 3 years a two decades ago.)There doesn't seem to be any listing of these options on the CME or Quickstrike. If you are with IBKR, they might have an international futures market that's liquid. Aside from that, you may be able to get a custom product with a forex broker. But your stacking major costs.

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Thanks. Are you aware of any other options? I thought about opening a spot position as well in case the devaluation will be gradually and slow (they can't devalue too much at once imo).

 

[Maverick74]

No, China's Central Bank has been purposely devaluing their currency to drive their exports. If they no longer need to rely on that then they can let their currency float more freely which they are.

 

[xandman]

Thanks. Are you aware of any other options? I thought about opening a spot position as well in case the devaluation will be gradually and slow (they can't devalue too much at once imo).

Nope. Currency derivatives is mostly an OTC game. CME/IMM is the most developed market accessible to retail. As I mentioned IBKR international futures markets or (Citibank?) forex might have something for you.

If the devaluation will be slow then you may wan't consider a carry trade through a forex broker. Identifying the right currency is the hairy part. It would be a nice new thread start, where I hope we get Maverick74, again.

The PnL distribution of that strategy is very similar to a short options trading program.

 

[Thous@nd-lot-Trader]

Hey Alex,
the liquidity on the ETFs isnt deep enough.

One way to trade USD/CNH would be OTC in the interbank market.
However, do trade there, you often need to trade higher notionals.

To my best knowledge, saxobank.com offers USD/CNH options with flexible expiry dates for their customers, but if you are based in the US I dont know if they accept American customers.

Another way to trade it, which is not the most cost effective, but you avoid having negative balance on your account through a gap risk... Vontobel for example offers them through leverage structured products called Turbos/Mini Futures:

https://derinet.vontobel.com/CH/EN/find-products?DerivativeSearch=usd/cnh


Greetings,
Alex

 

[MacroAlex]

Nope. Currency derivatives is mostly an OTC game. CME/IMM is the most developed market accessible to retail. As I mentioned IBKR international futures markets or (Citibank?) forex might have something for you.

If the devaluation will be slow then you may wan't consider a carry trade through a forex broker. Identifying the right currency is the hairy part. It would be a nice new thread start, where I hope we get Maverick74, again.

The PnL distribution of that strategy is very similar to a short options trading program.

Thanks. Seems to be good to buy some spot and some options. Good idea with the carry but I would prefer the USD/CNH because of the low volatility.

How do you come to the conclusion about the PnL distribution?

 

[xandman]

Thanks. Seems to be good to buy some spot and some options. Good idea with the carry but I would prefer the USD/CNH because of the low volatility.

How do you come to the conclusion about the PnL distribution?

Research by Anti Ilmanen, if I recall correctly. He has published distributions for most common strategies across a diverse range asset class....maybe even vice versa.

 

[MacroAlex]

Hey Alex,
the liquidity on the ETFs isnt deep enough.

One way to trade USD/CNH would be OTC in the interbank market.
However, do trade there, you often need to trade higher notionals.

To my best knowledge, saxobank.com offers USD/CNH options with flexible expiry dates for their customers, but if you are based in the US I dont know if they accept American customers.

Another way to trade it, which is not the most cost effective, but you avoid having negative balance on your account through a gap risk... Vontobel for example offers them through leverage structured products called Turbos/Mini Futures:

https://derinet.vontobel.com/CH/EN/find-products?DerivativeSearch=usd/cnh


Greetings,
Alex

Saxobank seems to have a good offer with prices that seem to be ok as well. Thanks for the info.

 

[laochen]

hi, what do you think about the vanilla option offfered by Saxobank? I have established some positions on the underlying USDCHN. Saxobank provides very flexible choice allowing we select expiry date and strike price. Actually I made most of my call positions to be striked at 8.0000 (the most fancy price available) and let them expiry at the end of this year. Finally I'd say I am a native Chinese citizen. I appreciate your thinking of shorting CNH. In the country that don't allow people voting, we have to buy USDCNH call options.

 

[MacroAlex]

I am not sure about the IV. Maybe a more experienced trader could elaborate on this? I mean everybody knows about the coming devaluation and I cannot imagine that there are still options worth their money with that amount of IV priced in.