Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
i do, mainly the aussie because it is easier for me to get a grip on my local currency, news etc. I have had a very successful year trading the aussie. I guess i am a bit naughty in my approach in that when the aussie was falling i was trading mostly Puts. I was able to sell options around 8-10 cents away with 45 DTE for a ROI of between 5-13%. I found Calls to be harder to get a decent ROI and chewed more of my excess margin.
At the moment i can't seem to find a trade on the aussie at a level that i feel comfortable with, with a close to respectable ROI. I have looked at trading other currencies and have dabbled here and there, but because i do not really understand their macro environment i have not been comfortable enough to place too many trades.
i have found the currency options to be fairly liquid. i generally sell puts on down days and have found on a number of times some strikes are better value than closer to the money strikes through demand i guess. i think you need to time your trades, a bit of volatility can have a big impact on individual strike prices for a day or so then they go back to normal. It is worth a look i think if the conditions are right.
bakes
Can you help answer these questions from other members on NexusFi?
After looking at currency options over the weekend, I decided to take the plunge. sort of. Here is my thinking:
PROS
very liquid market, even for deep out of money
some have ROIs around 4% for deltas at .05 or less
CONS
I'm still scared of major price shocks due to Central Bank moves
So, I decided to look at selling an option, and then buying a lower delta option. Here's a specific example:
Pretty good ROI, actually better than the naked 1.405 call by itself. That surprised me. Plus, knowing that my downside is limited - absolute worst case is a $1250 loss per option - makes this an attractive trade.
I've done only a handful of these one today, and am looking to do more. I'm not going crazy with it, but aiming for 10-15% of my overall portfolio.
Please feel free to poke holes in my thinking, if you see some!
edit: I should point out that I legged into this, rather than enter the order as a spread (simultaneous sell of 1.405 and buy of 1.415). There is risk here of a runaway market, and this takes a bit more effort. I figure this is worth it, considering there is 55% yearly return for doing this.
I looked at your trade and pulled up the options. When I traded a few years ago I didn't follow the EC because of low premium. I mirrored your trade and while the prices were different slightly I could see the trade and was surprised that the premium was that high compared to what it used to be.
So i pulled up a chart and started playing with it. Here's my take. I like tech analysis. I put a trend line across the bottom and using 7/10 and 9/06 as bottom points it appears that EC touched the trend line and reversed today. Based on that I STO 1 jan 1.275 put for .0012 or $150.00. I plan to only keep it for 30 days.
I also pulled up the probability chart and it shows (if you can believe this) a less than 1% chance of expiring below this price point. ROI 23% if kept til exp.
The prob. of your 140.5 call reflects close to the same percentage (slightly over 1%).
The premium used to be low because of minimal moves in the contract. It appears to be making more pronounced moves now. So I question the validity of the 1% chance of expiry on either yours or my position. But it will give us something to watch. I hope we both succeed.
Looking back my Delta ranged from .03-.05. One thing that will skew my ROI is that i use margin * 2.8, not 3 like Ron does, so that will increase my ROI. the AUD trades is the only instrument where i will go above a delta of 0.03. I generally look at 0.03 as a starting point and then look at how far away that is from the current price then look at the macro environment.
Currently there i nothing offering remotely the ROI i have been getting with the AUD. A trade i would be comfortable placing right now would have an ROI of just under 3%.
I've just started looking at currency futures options, so I was interested in your EC trade. I also like the look of muffin58's 1.275P, and wondered what would happen If you strangled the two of them.
I've adjusted the strikes a little to even up the premiums and the deltas, and it looks promising. I also did a calculation for an Iron Condor (at least I think that's what it's called).
Now when I see monthly ROIs over 5% my first thought is that there's probably an error in the spreadsheet. Can somebody check this?
As you say the difficulty with the more complex combos is that you could be left exposed if you have to leg in. Maybe a combo order would get filled around a news spike. There may be one on the Euro for the bid rate announcement tomorrow.
