London Olympics - Genuine Trading Opportunity or Far Fetched Idea? | Forex Factory

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London Olympics - Genuine Trading Opportunity or Far Fetched Idea?

  • #1
  • First Post: Apr 16, 2012 1:00pm Apr 16, 2012 1:00pm
Hi,

As you all know 2012 is an Olympic year and this year's games will be held in London, UK.

As we all know the Olympic games are perhaps one of sports largest events, and attract millions of visitors, players and businessmen around the world.

Do you think this could provide a trading opportunity based on the fundamental concept of demand and supply, that is, more demand for the GBP as people come to the UK and spend. The spending will not only be by visitors but by governments and businesses seeking to take advantage of the business opportunities the Olympics provides.

Would appreciate any insight,

Cheers
Abi
An investment in knowledge pays the best interest - Ben Franklin
  • #2
  • Apr 16, 2012 4:39pm Apr 16, 2012 4:39pm
I've actually thought about this my self, and I look forward to seeing what the more experienced members in here say about this.
Well done bringing it up though.
  • #3
  • Apr 16, 2012 7:02pm Apr 16, 2012 7:02pm
Hi Abi. I like the core idea - that the Olympics will probably benefit the pound.

But I’m left to wonder whether the games might just be a “neutralizer” to keep shorts from playing out very well this spring and early summer. Maybe the best opportunity will be a long term short trade after the Olympics have concluded. Something to consider . . .
  • #4
  • Apr 16, 2012 7:09pm Apr 16, 2012 7:09pm
Quoting Pips_Cruiser
Hi Abi. I like the core idea - that the Olympics will probably benefit the pound.

But I’m left to wonder whether the games might just be a “neutralizer” to keep shorts from playing out very well this spring and early summer. Maybe the best opportunity will be a long term short trade after the Olympics have concluded. Something to consider . . .
Thanks for your insight cruiser, the 'neutralizer' concept makes perfect sense, however, that said, I was thinking that the sheer volume of people and money might overwhelm the shorts and cause an appreciation in the pound, because people will come to the UK from across the globe, and people from exotic countries who dont have a deirect rate with the GBP might have to buy dollars with their own currency and subsequently convert it into pounds. But I think you're right in the sense that the trade may not work on that fundamental concept only, maybe if some technical or other indicator accompanies this idea then it could be worth a shot.

I hadn't thought of the post-olympic trade opportunity, something to look into too, thanks for that

Cheers
Abi
An investment in knowledge pays the best interest - Ben Franklin
  • #5
  • Apr 16, 2012 7:31pm Apr 16, 2012 7:31pm
Thinking the same thing months ago. Was looking at GBP/aud forming a base at the time. may still buy this on a break of the decending channel or a pullback. Looks like there's plenty of upside.
  • #6
  • Apr 16, 2012 7:59pm Apr 16, 2012 7:59pm
Quoting RBlackburn
Thinking the same thing months ago. Was looking at GBP/aud forming a base at the time. may still buy this on a break of the decending channel or a pullback. Looks like there's plenty of upside.
Thanks for that Blackburn, if you do make this trade, are you planning to hold on to it for a couple of months or looking to take out any pips asap, also, applying your SL at the bottom of the base I'm assuming?

Cheers
Abi
An investment in knowledge pays the best interest - Ben Franklin
  • #7
  • Apr 16, 2012 10:46pm Apr 16, 2012 10:46pm
As eu is relatively well correlated to GPB, you could short the e/u and go long the g/u.

Otherwise you should trade a basket of gpb currencies to offset the (albeit slim) risk of being in the worse trade of the best currency.


My personal opinion is that trading volume in pounds per day is over .4 trillion dollars, so the hard currency being purchased by tourists and to balance their credit card transactions may not be very significant compared to overall trading volume. Overall the pound isn't fundamentally a long if only due to their government debt being in excess of 1 trillion dollars and the prospects of recovery any time soon are less than remote.
Enter Signature
  • #8
  • Apr 17, 2012 12:44am Apr 17, 2012 12:44am
Just for interest the USD/ZAR strenthened during the soccer world cup 2010 by about 350 points , i stand corrected.
  • #9
  • Apr 17, 2012 2:28am Apr 17, 2012 2:28am
Interesting idea. You need to quantify it. Find out how many will come, based on last 3-4 Olympics and projections for this year. Then find out the average spent per person for the same. Then find out how many pounds there are and whether it really amounts to anything in the larger picture.

But it is good thinking.
  • #10
  • Apr 17, 2012 7:19am Apr 17, 2012 7:19am
It's a forward thinking idea, I commend you for that.

I'm not sure how you could trade using it though. As the Olympics isn't without precedent, it's relatively easy for the large funds to have already priced in the benefit of increased tourism. So you would effectively be trading on whether you think they have underestimated the benefit to the economy or overestimated it.

The problem with shorting after the olmypics is that the GDP figures for the period during the games will not be released until the following quarter, the danger being that the figures surprise to the upside.

Quoting Sarythsaya
As eu is relatively well correlated to GPB, you could short the e/u and go long the g/u.
Is this not the same as trading EUR/GBP, but is more expensive and requires more margin?

Just my humble opinion.
  • #11
  • Apr 17, 2012 7:47am Apr 17, 2012 7:47am
Quoting Binyamin
I would also be interested to know how the market will react if there will be a "terrorist" attack during the london games on the scale of 911. I mean c'mon if it happen we all know it will be the governments doing.

http://www.youtube.com/watch?v=40IiYOccEFU

I don't think the idea of a terrorist attack is too far fetch. Lets say during the closing ceremony the whole stadium blow up killing everyone in there. I am not hoping for one, I am just wondering about trading opportunities given that scenario.
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  • #12
  • Apr 17, 2012 8:38am Apr 17, 2012 8:38am
+10 Nate. Unreal.

OP, the problem is getting any kind of reliable stats whatsoever. The IOC have a polyanna mutiplier they use to encourage bids, the govts are usually miles out, so you're left with private sector to plug the gaps.
If you take this to be true: http://www.visaeurope.com/en/newsroo...ic_impact.aspx
That's £5.1bn / 5 years, forward from here it's a mere £1.27bn/year.
To put into context, that's approx $2bn of $2.4trn gdp pa = <0.001% of GDP. Ie peanuts.

More realistically, PWC did a study on the economic impact of the Olympics prior to the Athens games:
http://www.pages.drexel.edu/~rosenl/...pics%20PWC.pdf

The report has a touch of the mystic megs given what's happened recently.

"The Games should be a positive legacy for Athens, but it may be associated with a debt overhang that could take many years to pay off."

Or never as the case may be.

Based on that report, Athens and other Olympic cities, my own take is that most benefits seem to accrue prior to the games in construction & employment. Most costs materialise post-event, and although tourism will offset these costs in 2012, post-Olympics you'll see a small fall in productivity -ergo lower GDP, so expectations of interest rates low for longer, so a cheaper £ if it does have any effect. This assumes the euro hasn't nose-dived like an olympic swimmer by then.

However, if we win more than a dozen gold medals and I get tickets to beach volleyball, the lift in sentiments may carry us through into our own mini post olympic economic boom spending bonanza.
  • #13
  • Apr 17, 2012 8:42am Apr 17, 2012 8:42am
Quoting Binyamin
I would also be interested to know how the market will react if there will be a "terrorist" attack during the london games on the scale of 911. I mean c'mon if it happen we all know it will be the governments doing.

http://www.youtube.com/watch?v=40IiYOccEFU

I don't think the idea of a terrorist attack is too far fetch. Lets say during the closing ceremony the whole stadium blow up killing everyone in there. I am not hoping for one, I am just wondering about trading opportunities given that scenario.
I really hope not, cos I'll be in London trading from my phone.. lol
  • #14
  • Apr 18, 2012 4:36pm Apr 18, 2012 4:36pm
Quoting -nate-dogg-



Is this not the same as trading EUR/GBP, but is more expensive and requires more margin?

Just my humble opinion.
No it isn't the same, because trading EUR/GBP doesn't involve the US Dollar.
  • #15
  • Apr 18, 2012 4:38pm Apr 18, 2012 4:38pm
I see Binyamin's post was promptly removed from the thread!
  • #16
  • Apr 18, 2012 6:38pm Apr 18, 2012 6:38pm
I don't think the Olympics will cause a run on the Pound, enough to have an effect on world currency markets.

Soros probably trades more in a day, than will be spent due to the Olympics.
  • #17
  • Apr 21, 2012 9:58am Apr 21, 2012 9:58am
Quoting triphop
+10 Nate. Unreal.

OP, the problem is getting any kind of reliable stats whatsoever. The IOC have a polyanna mutiplier they use to encourage bids, the govts are usually miles out, so you're left with private sector to plug the gaps.
If you take this to be true: http://www.visaeurope.com/en/newsroo...ic_impact.aspx
That's £5.1bn / 5 years, forward from here it's a mere £1.27bn/year.
To put into context, that's approx $2bn of $2.4trn gdp pa = <0.001% of GDP. Ie peanuts.

More realistically, PWC...
Ok lets say that the real inflows will be like peanuts compared to whats needed to cause a trend. But what about the "trading" flows that will be created in anticipation of all of this?

Its just a mental thing like every other news or fundamental pattern. I mean it takes minimum of quarters for economies to adjust to effects of fundamental shifts of say inflation and interest rate shifts. But the price's of instruments related to that shift adjust to those shifts months before they occur (pricing in)

(looking at the daily chart of EURGBP; who knows,... we may have already missed the train)

So whatever the effects of those shifts have on the economy, the price movements in traded instruments in short to midterm are largely dependent upon the perception of those shifts to the people trading them. So from a speculators point of view it does't matter how much inflows the Olympics will bring but what is the perception of traders.

If traders think pound could go up cause of Olympics than it will go up no matter if the economy benefits from it or not. Just like your TA patterns work.

In end its all about orders.
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  • #18
  • Last Post: Apr 22, 2012 11:15am Apr 22, 2012 11:15am
Nasir, the last discussion on orders here made me a leave for several months it got so bad, so I'm not the one to pick it up with. But what I care about is are the olympic a tradeable event? Or do they provide a comfortable fundie bias to place trades with? It's pretty clear the answer is no due to size, timescale and historical effects on currencies. If it were, then the discussion of how it transmits in the economy through GDP, interest rates inflation et al would be worth it. But as it is...

It won't stop articles citing the 'olympic effect' written by people with no skin in the game appearing the next few months of course. But if you can find a trade in all this though, then more power to you.
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