What would you do with your Carry trade?

M

mizhael

Hi folks,

Happy trading...

I am a systematic carry trader, in the sense that I don't really do carry trade in a discrete approach.

I did some backtest, and found carry trade to be of option-selling type, ie. you gain small premium over time, but whenever big shocks occur, you give it all up and even lose a lot of money. Over the long run, many people say they don't make any money from carry trade.

Recently I lost a lot and stopped out...

Are you guys still holding onto it?

What's best way to improve such situation?

Please share your experiences...

Thank you!
 
Occasional blow-ups is an intrinsic feature of option selling. Even big firms who've been in the business for 30 years like Timber Hill have occasional massive drawdowns.

The secret is probably just to know where you are ready to reduce the risk or totally quit and make a break till the market settles... and be well-capitalized.
 
Timing is critical. So is trading at a size that allows for fast maneuvering. Resumption of the trend after a spike down is often a good time to enter. If it fails stop out and try again. You want to jump on without taking too much heat, which often happens after a bunch of other carry traders just got blown out and maybe even some shorts entered the market. You can adjust your exposure on winners so u don't give too much back on the next pullback.
 
Quote from mizhael:

I am a systematic carry trader, in the sense that I don't really do carry trade in a discrete approach.
More...

Hi, very interesting. Would you mind sharing with us how you execute the carry trades, what pairs were involved and what broker you use?
 
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