TRY/JPY hedge | Forex Factory

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TRY/JPY hedge

  • #1
  • First Post: Aug 28, 2007 8:11am Aug 28, 2007 8:11am
hey guys,

I have been interested in carry trades for a long time now and been looking at ways to trade them with less risk, as traded them naked is too risky for my risk appetite.

I looked at the charts for NZD/JPY and TRY/JPY. Historically they have been very closely correlated, even in the recent major unwinding. I am currently trying a long TRY/JPY position and hedging with a short NZD/JPY. TRY is the turkish lira and the base rate is 17.5%. The strategy would give quite a nice margin for error if held medium to long term.I am using Saxobank for the trade as they have both try/jpy and nzd/jpy. IT could be used with as much leverage as you felt was best suited to you. I am very conservative by nature. Any thoughts ?
  • #2
  • Aug 28, 2007 8:47am Aug 28, 2007 8:47am
Peter M,

What I see here looks very good. Take a look at the numbers below

TRY/JPY 10/6 - Present, 9.24%
NZD/JPY 10/6 - Present, 4.23%

TRY/JPY 7/16 – Present = -9.5%
NZD/JPY 7/16 – Present = -15%

Now, one point that is VERY weird in my book is that NZD/JPY (your short pair) went down a whole lot more than the higher yielding TRY/JPY pair during the latest correction. This typically isn't what I would expect. Normally one would suspect the bigger carry pairs to be going down more, correct? USD/JPY vs NZD/JPY for instance. NZD/USD will go down during every single correction. In this case, TRY/NZD would have gone up, even though TRY/NZD itself could be a carry pair. This shows that the two pairs, although correlated, are not running together. Though for your position, this would be extremely good.

Give it a go. Use light positions initially so you can add a few more positions if great separation occurs. If TRY/JPY continues going up faster than NZD/JPY and NZD/JPY falls faster as well ... you are in for some fine profits in pips as well as interest.

Will you be in both pairs with the same $ amount? If so, have you considered using the /USD crosses for better spreads instead of the JPY? As the JPY exposure will be slim to none if you do use a same dollar amount hedge.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #3
  • Aug 28, 2007 10:58am Aug 28, 2007 10:58am
Yeah, I thought it was a little odd too. I think a lot of the major banks have a lot of money in NZD/JPY , I'm not sure if the major players use TRY/JPY or not. Does anyone know ?

I know USD/JPY often doesnt move quite as much as the others during a carry trade unwind because its always positive for the dollar. I think its due to the fact hedgefunds are priced in dollars.

I am using the same position sizes in dollar terms, I think this would actually create a position almost identical to a long TRY/NZD. I'm not sure how using dollar crosses would help would help, could you explain that?



Quoting StockKJay
Peter M,

What I see here looks very good. Take a look at the numbers below

TRY/JPY 10/6 - Present, 9.24%
NZD/JPY 10/6 - Present, 4.23%

TRY/JPY 7/16 – Present = -9.5%
NZD/JPY 7/16 – Present = -15%

Now, one point that is VERY weird in my book is that NZD/JPY (your short pair) went down a whole lot more than the higher yielding TRY/JPY pair during the latest correction. This typically isn't what I would expect. Normally one would suspect the bigger carry pairs to be going down more, correct? USD/JPY vs NZD/JPY for instance. NZD/USD will go down during every single correction. In this case, TRY/NZD would have gone up, even though TRY/NZD itself could be a carry pair. This shows that the two pairs, although correlated, are not running together. Though for your position, this would be extremely good.

Give it a go. Use light positions initially so you can add a few more positions if great separation occurs. If TRY/JPY continues going up faster than NZD/JPY and NZD/JPY falls faster as well ... you are in for some fine profits in pips as well as interest.

Will you be in both pairs with the same $ amount? If so, have you considered using the /USD crosses for better spreads instead of the JPY? As the JPY exposure will be slim to none if you do use a same dollar amount hedge.
  • #4
  • Aug 28, 2007 11:36am Aug 28, 2007 11:36am
i don't recommend you to trade try currency. try is fastest currency on the world i think. it's possible that usd/try could get higher than 2,0000... your account could blow up in 2-3 days
  • #5
  • Aug 28, 2007 12:25pm Aug 28, 2007 12:25pm
Quoting u_atatunc
i don't recommend you to trade try currency. try is fastest currency on the world i think. it's possible that usd/try could get higher than 2,0000... your account could blow up in 2-3 days
I have a chart here that shows usd/try:
Attached Image
  • #6
  • Aug 28, 2007 1:00pm Aug 28, 2007 1:00pm
Make sure Saxo is giving you a competitive overnight swap on your positions. Too many brokers take a huge slice of the swap. Oanda seems to have some of the better retail swap rates, yet doesn't offer TRYJPY nor NZDJPY (surprise surprise).

At the end of the day, whatever effective swap you're getting, plus whatever spreads you're paying (can't imagine the retail spread size on TRYJPY) will probably eat away at the hedge's profitability..
  • #7
  • Aug 28, 2007 3:32pm Aug 28, 2007 3:32pm
Quoting Trader KGB
Make sure Saxo is giving you a competitive overnight swap on your positions. Too many brokers take a huge slice of the swap. Oanda seems to have some of the better retail swap rates, yet doesn't offer TRYJPY nor NZDJPY (surprise surprise).

..
KGB,

You don't need those pairs to trade that exposure. Switch your trade settings to %, then trade long NZD/USD and long USD/JPY. The USDs will cancel out, at least mostly, and you will be left with a long NZD/JPY position. It is annoying.

Quoting peterM
I am using the same position sizes in dollar terms, I think this would actually create a position almost identical to a long TRY/NZD. I'm not sure how using dollar crosses would would help, could you explain that?
It may not help with your broker. However, with many brokers, they use /USD crosses to as their "attraction" to trade at their platform. For instance, EUR/USD = 2 pips, AUD/USD = 2 pips. While they do this, they usually will have higher spreads with other currency pairs that people normally do not trade as often. EUR/AUD for instance. It is cheaper to trade EUR/USD and AUD/USD if they both have a 2 pip spread than it would be to trade EUR/AUD if it has a 10 pip spread.

Anyway, as you stated, which is correct, you would be trading TRY/NZD. If your broker has this, or the inverse NZD/TRY, it may be best to trade that. It really all comes down to how Saxo configures their spreads. Does NZD/USD spread cost + USD/TRY spread cost = TRY/NZD spread cost? Does it equal NZD/JPY cost + TRY/JPY spread cost? See what I mean, sometimes it saves a few dollars (or more) depending on what you are trading.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #8
  • Edited 6:22pm Aug 28, 2007 5:54pm | Edited 6:22pm
Thanks for the replies guys. I have just had a look at the spreads for the TRY pairs with saxo. TRY/JPY and USD/TRY are both 20 pips. NZD/TRY is not showing a quote, I sent them an email asking them what their spread is. I get the feeling the liquidity for this pair will be very very low and as you said StockJay, it may be cheaper to trade the dollar pairs.

At first glance, this could potentially be a lower risk way to earn on the carry trade. It does have bigger interest differentials than GBP/JPY and NZD/JPY and seems to survive a lot better when the stock markets are in crisis.

I could really do with some more data for NZD/TRY but I think it may be difficult to find. The pair earns around 5 pips per day in swap, so it would only take a few days to cover the spreads.
  • #9
  • Aug 29, 2007 12:20pm Aug 29, 2007 12:20pm
saxo got back to me. 30 pip spread on NZD/TRY. The swap is a huge 8.5 pips per day so it would only take 4 days to cover it. Anyone know any other brokers that offer NZD/TRY? Or USD/TRY and NZD/USD to make the synthetic version?
  • #10
  • Sep 11, 2007 3:19am Sep 11, 2007 3:19am
go go go
  • #11
  • Edited 4:07am Sep 11, 2007 3:49am | Edited 4:07am
TRY/DKK's swap is 14 pips!


The spread is 80 pips with "SAXO BANK" and the volatility is high. The risk is greater.
go go go
  • #12
  • Last Post: Edited 5:07am Sep 12, 2007 4:56am | Edited 5:07am
14 pips.. that's a lot.. is that because it was triple rollover or is it that every day?
I like TRY/NZD as the volatility seems to be a lot less than most of the yen carry trades as NZD/JPY and TRY/JPY are quite closely correlated.
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