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Currency Options

  • #1
  • First Post: Jul 13, 2004 11:49pm Jul 13, 2004 11:49pm
Hi, everyone

Has anyone here ever traded currency options? Can they be traded online and can someone share their opinion on them...?

Thanks
  • #2
  • Jul 14, 2004 3:19am Jul 14, 2004 3:19am
I started using currency options quite recently as I was getting frustrated with not being filled properly when data came out with normal forex trading. It's quite annoying when you place an order and then have to wait 30 seconds for a requote that's a hundred points higher. Strictly speaking I'm not using real options but instead I'm using ones which have a life of only one day. For the system I'm using it's very important that the option has a short life. At the moment I'm trading them with IG Index but I hope to move onto real overnight options with a proper broker shortly. The minimum deal sizes there are quite large hence my initial experimentation with IG.
I don't think currency options are a substitute for normal forex but instead are a good bolt on for trading special situations. It's definitely worth investigating and as I have said on this board before, there's no way I'd go back to normal forex for data now.
  • #3
  • Jul 14, 2004 4:26am Jul 14, 2004 4:26am
jambotrader, i also have an account with IG index (here in aus), but i dont think they have currency options. Maybe the IG in UK might have...
Which broker are u looking to switch to later on? Also, did you learn options from an online source or from a book?

thanks again
  • #4
  • Jul 14, 2004 10:59am Jul 14, 2004 10:59am
IG is UK based. The platform is java based and you have various choices in the menus. I bought a guide to trading data from ebay, the same guy I bought the exhaustion system from.
The guide itself shows you how to pick data that will move the market, how to assess it so you can understand how the market may move, and then to pick a trading strategy in order to trade off it. All is based on options or binary trading. It doesn't teach you much about options but rather how to use them if that makes any sense.
I don't know which broker to go for yet. But so far I'm happy with IG. Maybe a choice of Man, Saxobank or Berkeley. They all seem to be well established.
  • #5
  • Jul 15, 2004 3:40pm Jul 15, 2004 3:40pm
I traded currency options for a few years before moving to direct Forex dealing. Options are much more complicated, and in my opinion not worth the trouble, especially when you have access to direct dealing in the Interbank market. I traded with three different dealers based in the UK. Heed my warning that the options brokers have a stockpile of tricks they use to help you loose your money. I find that Forex offers a much more consistent set of broker rules.
  • #6
  • Jul 16, 2004 5:07am Jul 16, 2004 5:07am
There is so much slippage on data for most people who trade online. All of the brokers I have tried have had these problems to some degree. Theese simple options are a way for me to capture the move as I don't have the capital to trade with the banks at quarter of a million a shot. I also like the idea of knowing what my maximum risk is becuase there can be no slippage when the option is worth zero. The only drawback is that it can only be used for big data otherwise there isn't enough of a move before the option expires in the evening.
  • #7
  • Jul 16, 2004 5:17am Jul 16, 2004 5:17am
Quoting jambotrader
There is so much slippage on data for most people who trade online. All of the brokers I have tried have had these problems to some degree. Theese simple options are a way for me to capture the move as I don't have the capital to trade with the banks at quarter of a million a shot. I also like the idea of knowing what my maximum risk is becuase there can be no slippage when the option is worth zero. The only drawback is that it can only be used for big data otherwise there isn't enough of a move before the option expires in the evening.
Did you also try one-touch, no-touch or digital options?
the minimum needed to open an account with refco is $300.
No-touch is quite handy when there's no big data
  • #8
  • Jul 16, 2004 9:48am Jul 16, 2004 9:48am
Thanks for the info sidekick but right now I would never switch to anything but the real bank traded options (also not heard great things about refco or betonmarkets who also do no touch and stuff like that.
Today I did the options before the inflation and I made over 200% return in less than one and a half hours. Ok I only risked £81 this time but got back approximately £260. For sure it beats messing around with delayed requotes. With the bank options the spreads will be narrower so you could do better but I'm not in the position to risk £1000 or whatever large sum is necessary, not yet anyway.
  • #9
  • Jul 17, 2004 4:20am Jul 17, 2004 4:20am
Jambotrader, I think I have the same (Copperchip) system that you are using. I don't have an account with IG Index yet but am looking at opening one to trade currency options before news releases. Which report did you trade and have you traded many other economic reports using options? Have you also tried the Binary Betting Strategy?
  • #10
  • Jul 17, 2004 4:48am Jul 17, 2004 4:48am
Its the same one usdtrader. I have only got it recently but so far but yesterday for my third attempt. The first time I tried it was the binary set up for the US rates but I didn't get to use it then because the prices were not at the levels similar to what the manual said so I left it. The third time I told you about but the second time was for the last US payroll numbers when I did the options for the first time and out of the two it was my best make in percentage terms but in real money terms I made about the same as yesterday because I only risked £3 per point. Looking ahead the way I see it is that we need a good move to make money so I am going to stick to only non farms payrolls and judge the inflation reports on an on going basis. I actually got some help from the seller in that I asked about the inflation reports, if both could be done and he suggested wait for the cpi, so maybe I had some luck there as I doubt I would have made anything from the ppi.
  • #11
  • Jul 20, 2004 2:41am Jul 20, 2004 2:41am
hey usdtrader, what do you think about this. Right this second binary gbp is 39 to climb above 18684 and eur is 46.7 to fall below 12434. I know its not strictly data but Greenspan should move the market one way or the other and all we would need is 10 points on the euro or 30 on the pound. Payout not great but Im sort of just thinking aloud. Just thinking aloud, but what do you think?
  • #12
  • Jul 20, 2004 5:02am Jul 20, 2004 5:02am
Yes, have been considering playing the binaries on Greenspan. To maximise these types of bets though it's best to look at them nearer to the IMM close when they should be cheaper. His speech today is near to the IMM close so I might wait to see how the binaries are priced then. Ideally what we would be looking for is approx 25-30 pips out of the money. His second speech on Wednesday should also cause some movement.
  • #13
  • Jul 20, 2004 5:38am Jul 20, 2004 5:38am
You're right about that, theres just too much time priced into them right now. Even though that euro contract would be in the money they still sell it at only 65, which would not cover the pound contract loss.
For later I think dollar swiss against euro would be ideal but euro has to climb back above 12434 and swiss stay over 12289 for it to work and as you say we need about 20 or 30 points against us. It a tall order but with euro, swiss and pound all moving in different directions against each other hopefully it will create an opening for us somewhere.
  • #14
  • Jul 21, 2004 4:29am Jul 21, 2004 4:29am
Did you get anything done?. I couldn't see two matching trades. Looks like I should have done my morning idea. What put me off was the return. Normally I'd be over the moon with 14.3% and bite your hand off but I've traded the options twice now and both times I got well into triple figure returns. Plus the fact that Greenspan was talking and I honestly didn't think we'd see any big moves until then. Next time less greed and less thinking!
Today apparently Greenspan is making the same speech so will it move the market much? Not sure, but I'm guessing that the euro falls a bit more. If euro goes to 1.2375 I might sell and target 1.2320 with a stop at 1.2395 instead of trying options. Or maybe I'll buy put only, depends on the price. If I see a 1.2325 put under 10 when its at 1.2375 or so I might be tempted. That way at least I don't need to worry about a stop.
  • #15
  • Jul 22, 2004 3:48am Jul 22, 2004 3:48am
Quote
Next time less greed and less thinking!

Well said. I guess I was trying to apply the strategy to the letter and squeeze every last bit of profit out, but 14% is acceptable

I ended up with a 20 pip profit on Greenspan. Marc mentioned that options offered more scope for returns earlier into the trading session.
  • #16
  • Jul 22, 2004 6:08am Jul 22, 2004 6:08am
Congrats. After I missed the early trade I managed to talk myself out of doing anything. Can't see anything left for this week on the data front. For next week people are saying PCE index will move the market as Greenspan talked about it.
  • #17
  • Aug 5, 2004 2:05am Aug 5, 2004 2:05am
usdtrader: Are you playing the UK interest rates today? My view 25 points is already priced in and pound may fall after a slight blip. BUT BUT BUT, the problem is the market is waiting for the jobs on friday and so there might be a lack of interest to trade. This is the slight problem. So probably I will end up just doing the downside side of the bet on the pound.
  • #18
  • Aug 10, 2004 3:42pm Aug 10, 2004 3:42pm
usdtrader, just wondering if you managed to catch the trades for the US rates. The prices for the pound and euro were almost as shown in the example so I went for it but sadly I chickened out after 30% profit when I could have made double my money in the end. So again I talked myself out of holding it for extra profit but I guess you can't get everything spot on everytime right.
  • #19
  • Aug 11, 2004 2:53am Aug 11, 2004 2:53am
Conditions were perfect for the Binary Bets, right up close to the IMM close and there was some uncertainty as to where the rates would go.

I also followed the same currency pairs. Using the decimal prices I got the pound at 3.6 and the Euro at 4.4 just before the annoucement. Closed out when the pound went to 10 and the Euro dropped to 1.86.

Could have held on for a bit more, but those prices were changing so quickly and I was also keeping a watchful eye on the charts.

Nice quick profit all the same
  • #20
  • Aug 11, 2004 3:56am Aug 11, 2004 3:56am
Quoting usdtrader
Conditions were perfect for the Binary Bets, right up close to the IMM close and there was some uncertainty as to where the rates would go.

I also followed the same currency pairs. Using the decimal prices I got the pound at 3.6 and the Euro at 4.4 just before the annoucement. Closed out when the pound went to 10 and the Euro dropped to 1.86.

Could have held on for a bit more, but those prices were changing so quickly and I was also keeping a watchful eye on the charts.

Nice quick profit all the same

You did the euro the same time as me then I also got 4.4 and closed 1.67. I got 4 for the pound and left it to run out (you never know right). What got me was that when the euro was at break even on the day at 1.2276 I was also breaking even and it bounced about there a few times which made me lose my nerve so I closed it out once it fell to the 60's but no sooner had I checked my trades I saw it was in the 50's. But I made a profit so I can't really grumble.
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