Greetings Guys and Dolls,
I have been wondering if it is at all possible, and if so is it viable for a retail trader to hedge a carry trade using options.
Now I know that in Forex we have the exotic/Vanilla options that are traded through the brokers. I must say I wasn't thinking about those options but certainly if U know of a strategy that uses these options so much the better if you would like to share it with us on these forums.
Rather what I was thinking was the use of options issued/traded in the PHLX. First of all can these options be used for a non-US dollar pair (e.g GPY/JPY or NZD/JPY) or is it only in relation to a pair with the USD?
Secondly what is the actual mechanism and liquidity of these options? ( I m not talking about the actual option greeks etc but rather the practicalities of the option purchase as i presume it would need some special arrangement between your forex bank/ Broker in order to co-ordinate the entire transaction.)
I m pretty sure that the big players..or rather (the folks that really know what they are doing!!) are hedged in the carry trade....I know that we hear a lot of ha hu about the unwinding of the carry trade day in day out for the last week or so on CNBC and other news wires.......its only the panic unwinding of the position from the guys who have not a very good idea what they are doing......the big players in the carry trade don't really care which way the market moves...as long as the interest are not equal. (thats what I ve concluded anyways!!) coz they know which way the market moves..they make money!!!!! ( those are the people I refer to as the 5% club!)
I guess what I m referring to here is the use of a Dynamic Hedge in stock trading in the Forex or any variant of it...
One last question I would like to know if you know the answer to the above is would the premiums paid for the usage of such options eat up the interest earned. Somebody did "indicate" to me that he believed the option premium would probably eat into the interest earned but he wasn't sure.....
So any handy hints on the above would be greatly welcomed......or even if anyone passing by has any info on any educational resources I can refer up on the matter I would be greatly appreciative....
Many thanks for your time...
I have been wondering if it is at all possible, and if so is it viable for a retail trader to hedge a carry trade using options.
Now I know that in Forex we have the exotic/Vanilla options that are traded through the brokers. I must say I wasn't thinking about those options but certainly if U know of a strategy that uses these options so much the better if you would like to share it with us on these forums.
Rather what I was thinking was the use of options issued/traded in the PHLX. First of all can these options be used for a non-US dollar pair (e.g GPY/JPY or NZD/JPY) or is it only in relation to a pair with the USD?
Secondly what is the actual mechanism and liquidity of these options? ( I m not talking about the actual option greeks etc but rather the practicalities of the option purchase as i presume it would need some special arrangement between your forex bank/ Broker in order to co-ordinate the entire transaction.)
I m pretty sure that the big players..or rather (the folks that really know what they are doing!!) are hedged in the carry trade....I know that we hear a lot of ha hu about the unwinding of the carry trade day in day out for the last week or so on CNBC and other news wires.......its only the panic unwinding of the position from the guys who have not a very good idea what they are doing......the big players in the carry trade don't really care which way the market moves...as long as the interest are not equal. (thats what I ve concluded anyways!!) coz they know which way the market moves..they make money!!!!! ( those are the people I refer to as the 5% club!)
I guess what I m referring to here is the use of a Dynamic Hedge in stock trading in the Forex or any variant of it...
One last question I would like to know if you know the answer to the above is would the premiums paid for the usage of such options eat up the interest earned. Somebody did "indicate" to me that he believed the option premium would probably eat into the interest earned but he wasn't sure.....
So any handy hints on the above would be greatly welcomed......or even if anyone passing by has any info on any educational resources I can refer up on the matter I would be greatly appreciative....
Many thanks for your time...