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Options hedge for profit

  • #1
  • First Post: May 3, 2007 3:44pm May 3, 2007 3:44pm
Buy a call and put at the same time on GBPUSD. Wait for volatility to create profit and close the hedge. Repeat. Is it that simple? I've seen a statement from a very successful group of FX options traders that do exactly this. Over and over again. Several times a month these traders enter GBPUSD options hedges. I believe some hedges are calendar hedges but some appear to be plain hedges. Going long and short simultaneously. It appears the volatility in GBPUSD will eventually outstrip the premiums paid to enter the hedge. These people that are running this hedge fund are noted as "Risk Manager of the Year" by a prevalent commodities magazine.
Jeff Swanson
It really is that easy.
  • #2
  • May 3, 2007 9:22pm May 3, 2007 9:22pm
Quoting THE FxORCE
Going long and short simultaneously. It appears the volatility in GBPUSD will eventually outstrip the premiums paid to enter the hedge. These people that are running this hedge fund are noted as "Risk Manager of the Year" by a prevalent commodities magazine.
...and you can bet your ass that the exchanges are re-adjusting the prices on new GBPUSD options to increase the premium. Finding volatility arbitrage in options (when actual price volatility is greater or less than implied volatility) is nothing new... you just got to find the right options to play before people catch on.
  • #3
  • May 4, 2007 9:16am May 4, 2007 9:16am
i'm getting the statements again to make sure but i think their spreads are 50+ pips on the options. i know where they trade as well and it's one of the biggest primes in the US.
It really is that easy.
  • #4
  • Sep 9, 2007 10:37pm Sep 9, 2007 10:37pm
hwere are the statemetns????

this seems like interesting strategy.
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  • #5
  • Nov 2, 2007 6:24pm Nov 2, 2007 6:24pm
Quoting jjk2
hwere are the statemetns????

this seems like interesting strategy.
no stetements then?
learn, profit, share
  • #6
  • Nov 4, 2007 11:38am Nov 4, 2007 11:38am
Buuuut, how much time premium are they buying the options with? If the markets start ranging then the value decreases...Unless these are purchasing the opts around news events with little time value left in the first place...
  • #7
  • Dec 10, 2007 8:47pm Dec 10, 2007 8:47pm
Hi,

Adding my own two cents. I've just learned about fx options a couple weeks ago but the strategy being discussed here works for earings reports on equities provided they move enough. I am looking to try it in fx (demo 1st of course) and see what happens.

Mike.
Taking Life One Pip At A Time I officially have my own opinion.
  • #8
  • Dec 11, 2007 12:06am Dec 11, 2007 12:06am
Quoting THE FxORCE
Buy a call and put at the same time on GBPUSD. Wait for volatility to create profit and close the hedge. Repeat. Is it that simple?
this is called a straddle, or a strangle if the call and put have different strikes. is it that simple? of course not, nothing that makes money is every easy there is something called theta, and its your worst enemy when buying a straddle. in simple terms, theta will cause you to lose money each day if the price stays still. there is money to be made in options (thats where i have found most of my trading profits) but like i said, its never easy.
Relax and be happy.
  • #9
  • Dec 16, 2007 11:38pm Dec 16, 2007 11:38pm
Quoting merlin
this is called a straddle, or a strangle if the call and put have different strikes. is it that simple? of course not, nothing that makes money is every easy there is something called theta, and its your worst enemy when buying a straddle. in simple terms, theta will cause you to lose money each day if the price stays still. there is money to be made in options (thats where i have found most of my trading profits) but like i said, its never easy.
Hi Merlin,

Where do you typically trade your fx options? I'm considering Saxobank; however, I'm concerned about them as a dealer. Perhaps an ECN that trades through ISE or PHLX exchanges would be best; however, they don't allow for cross currency fx options.

Your thoughts...

Thanks,

Walt
  • #10
  • Dec 17, 2007 9:27am Dec 17, 2007 9:27am
Options on forex? I've never heard of this. Where can we trade options on forex? And does anyone know of a "system" to learn to do this?
  • #11
  • Last Post: Dec 21, 2007 3:50am Dec 21, 2007 3:50am
Quoting Dreamliner
Options on forex? I've never heard of this. Where can we trade options on forex? And does anyone know of a "system" to learn to do this?
I trade them with ThinkorSwim. You can register a demo account (paper money).
And here is site about ISE FX options: http://www.ise.com/WebForm/options_p...rue&link1=true
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