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  • #321
  • Edited 4:34pm Jul 15, 2011 3:28pm | Edited 4:34pm
It's All Greek To Me

It's Friday afternoon and after sifting through the load of information available, I decided to structure a possible trade for the rest of July. As can be gleaned by the title, the catalyst for this trade will be Greece.

I'm going to play this on EUR/CHF and EUR/JPY, and anticipate a 500-1000 pip downside move in these pairings. My catalyst will be the EuroZone Summit on Thursday, where the direction of private sector involvement will be decided, due to the market's sensitivity to Greek Debt Sustainability and Contagion jitters. I'm not looking at EUR/USD because the Republicans and Democrats can't seem to get their act together and it annoys me when positions get taken out on a spike.

To succintly put it, there are 6 possible outcomes for Private Sector Involvement.

 

  1. The EZ officials decide on a debt buy-back using bailout funds from the EFSF in the secondary market. While this may not necessarily be the best option to increase Greece's debt sustainability, it will not be construed as a default by ratings agencies.
  2. The EZ officials decide on a bond-rollover, swapping maturing bonds for ones of greater maturity, perhaps also cutting interest rates on the bonds paid. This option would be construed as a selective default by ratings agencies.
  3. The EZ officials decide on a debt buy-back by tenders; essentially placing a bid on the bonds in a take-it-or-leave-it fashion. Buying the bonds back at a discount from face-value would reduce the debt burden, but this would be construed as a default and a credit event by ratings agencies.
  4. The EZ officials decide on a bond exchange, where existing bonds are swapped for ones with lower face-values. This would also reduce the debt burden, but would be construed as a default and possible credit event if it isn't voluntary.
  5. The EZ officials decide on a bond exchange with credit enhancements which is similar to the above bond exchange, but with a few investor guarantees to make it more attractive. This would however increase the costs associated with the procedure, and would be construed as a default and a possible credit event if it isn't voluntary.
  6. The EZ officials bicker and squabble and cannot come to a consensus.

By looking at these scenarios, odds are roughly 70% that Greece may find itself in some form of default by the ratings agencies within the coming month, based on the outcome of that meeting. Additionally, all of the scenarios would be EUR negative barring the first one, which leaves this trade with a 70%+ chance of getting to 1R to mitigate risk.

I'm thus structuring the trade as a macro/scale in one, hoping to establish my feeder stakes soon so that I at least have a position ahead of the meetings.

Event risks include:

 

  1. The possibility of manipulation by either the SNB or BoJ
  2. The EZ summit having the the first outcome from above

Will be very interesting to see how July plays out.

Regards,
xXTrizzleXx

  • #322
  • Jul 25, 2011 1:41pm Jul 25, 2011 1:41pm
Trizzle,

You laid out a well thought out plan. One of the things that I like about the Order Flow mindset is that you are anticipating, rather than reacting.

How did it workout for you?

How do you determine how much of the most likely scenario is priced in?
  • #323
  • Jul 25, 2011 9:57pm Jul 25, 2011 9:57pm
Quoting The Cheetah
Trizzle,

You laid out a well thought out plan. One of the things that I like about the Order Flow mindset is that you are anticipating, rather than reacting.

How did it workout for you?

How do you determine how much of the most likely scenario is priced in?
Heya TheCheetah and everyone else,

I was a bit ill so wasn't able to come on FF as much as I'd liked to update my journal. Additionally I have lots of family coming over in the next couple weeks, but I'll still try to pop in from time to time.

The trade was admittedly quite mediocre. While Greece did manage to get itself in a defaulted situation, the EFSF was able to guarantee the Greek Banks' Liquidity, and the wide range of measures agreed upon by the EZ Summit seemed to have quelled the market's negative speculation re:Greece. Some of my positions were able to move to BE, some of them had their stops hit, and the rest I removed when I saw the scenario wasn't playing out as I had anticipated.

Overall it was a loss, but it was managed well. I do want to commend myself for not straying and moving my stops back; I was able to see that things weren't going as planned, and decided to cut my losses and cancel any pending orders before significant damage could be done. That being said, this isn't the end of the Greece scenario, and I'm looking forward to playing it again in August -> September when the Troika comes along to see how Greece is faring along with it's fiscal targets.

Pricing in is a bit of a funny thing to put down and essentially I rely on observing the PA for the days/weeks leading up to the event; general expectations I can glean from participants and also how the market reacts to shifts in sentiment. Regrettably, the subjectivity does at times make it a bit tricky to decipher what's going on.

That being said, I have a couple trades on my radar right now, the one which is garnering the majority of my attention is USD/JPY. I have two positions on and I'd like to add further on rallies, but I remember the very spike-prone nature of this pair as of late, which has stopped out some good entries needlessly, and so I need to tread very cautiously with it. Like I said I'm looking for a move to 76/75, at which point I'll close my shorts and anticipate entering some long positions in the hopes of MoF/BoJ intervention. It's reasonable to assert that the market will view intervention as a legitimate threat at these level with the rhetoric from the Japanese Monetary Authorities regularly hitting the wires, as well as business groups lobbying for intervention.

For intervention though I'll be playing it on NZD/JPY since lately, the NZD economy has been in great shape, as opposed to the AUD, which is starting to show signs of uneven growth.

I have one risk-free positions in AUD/USD, EUR/USD and one with risk yet to be removed in EUR/GBP as well.

Tonight I'd like to play UK GDP if I can pulse the market well enough before the numbers are announced.

Regards,
xXTrizzleXx
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  • #324
  • Jul 25, 2011 11:57pm Jul 25, 2011 11:57pm
I think the overall outcome of the Greece situation is not so +ve as the prices are making it out to be. I was talking to one of my friends at a treasury desk, he said most of his clients were bearish on the E/U. So the current situation is more of a short squeeze.

Considering the huge expectations Troika is having from Greece it is bound to fail. If only, Uncle Sam can resolve their debt ceiling talks....
  • #325
  • Jul 26, 2011 7:22am Jul 26, 2011 7:22am
Quoting vicky_ag
+ve
What do -ve and +ve mean? I've seen this used on FF, I've done extensive Google searches but noone seems to know what it means. I only ended up reading about high-brow physics. Do people just use it to look smart or does it have a meaning?
If you don't risk, you don't ever have to lose.
  • #326
  • Jul 26, 2011 7:48am Jul 26, 2011 7:48am
Quoting xXTrizzleXx
Heya TheCheetah and everyone else,

I was a bit ill so wasn't able to come on FF as much as I'd liked to update my journal. Additionally I have lots of family coming over in the next couple weeks, but I'll still try to pop in from time to time.

The trade was admittedly quite mediocre. While Greece did manage to get itself in a defaulted situation, the EFSF was able to guarantee the Greek Banks' Liquidity, and the wide range of measures agreed upon by the EZ Summit seemed to have quelled the market's negative speculation re:Greece. Some...
Having fun dealing with the USD?

seems like the whole world is shitting the bed lately.. which country is making all the money off this !?! oh trizzles a country
  • #327
  • Jul 26, 2011 9:08am Jul 26, 2011 9:08am
Quoting bug
What do -ve and +ve mean? I've seen this used on FF, I've done extensive Google searches but noone seems to know what it means. I only ended up reading about high-brow physics. Do people just use it to look smart or does it have a meaning?
+ve = short for positive
-ve = short for negative
  • #328
  • Jul 26, 2011 4:15pm Jul 26, 2011 4:15pm
Quoting vicky_ag
+ve = short for positive
-ve = short for negative
A strange way to abbreviate words that are easy to spell, but thanks nonetheless.
If you don't risk, you don't ever have to lose.
  • #329
  • Jul 26, 2011 9:04pm Jul 26, 2011 9:04pm
Quoting vicky_ag
I think the overall outcome of the Greece situation is not so +ve as the prices are making it out to be. I was talking to one of my friends at a treasury desk, he said most of his clients were bearish on the E/U. So the current situation is more of a short squeeze.

Considering the huge expectations Troika is having from Greece it is bound to fail. If only, Uncle Sam can resolve their debt ceiling talks....
I'm kind of in the same boat as you, and the thinking is that the EUR/USD position will be ripe for the picking come resolution of the debt ceiling issue..I'm even thinking of a means to take profit by the end of the week just in case things get unpredictable. However with all the attention on the US right now, the market isn't really taking note of the EZ, despite widening periphery spreads. When it starts acting up again I'll be looking at EUR/CHF again.

Quoting newyear498
Having fun dealing with the USD?

seems like the whole world is shitting the bed lately.. which country is making all the money off this !?! oh trizzles a country
Quoting bug
What do -ve and +ve mean? I've seen this used on FF, I've done extensive Google searches but noone seems to know what it means. I only ended up reading about high-brow physics. Do people just use it to look smart or does it have a meaning?
I lol'ed @ these.

Regards,
xXTrizzleXx
  • #330
  • Jul 26, 2011 9:10pm Jul 26, 2011 9:10pm
I'd like to play the recent AUS CPI numbers which came out at 0.9% as opposed to consensus forecast of 0.7%, which will make the calls for a rate cut by the RBA seem a bit too early. I have one position from a bit earlier on, and I'll be happy to collect the swap as the market looks forwards to the next RBA Statement, where the July CPI will play a big part in future actions by the committee.

I also got a risk-free position in NZD/JPY which will be my BoJ/MoF intervention position. I'm eagerly awaiting the RBNZ's next monetary meeting to see how they'll go about their monetary policy..more dovish than I'd like to see and I'll be looking for a positon in AUD/JPY instead.

I'm still paying close attention to USD/JPY which is slowly making it's way down and I'm thinking of setting a TP at either 77 or 76, depending on how things go.

Regards,
xXTrizzleXx
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  • #331
  • Jul 27, 2011 1:26am Jul 27, 2011 1:26am
Quoting xXTrizzleXx
I'd like to play the recent AUS CPI numbers which came out at 0.9% as opposed to consensus forecast of 0.7%, which will make the calls for a rate cut by the RBA seem a bit too early. I have one position from a bit earlier on, and I'll be happy to collect the swap as the market looks forwards to the next RBA Statement, where the July CPI will play a big part in future actions by the committee.

I also got a risk-free position in NZD/JPY which will be my BoJ/MoF intervention position. I'm eagerly awaiting the RBNZ's next monetary meeting to see...
I got in AU yesterday during the consolidation. Thanks to strangley performing Oanda Android app (caused me a 6% loss on E/U) , I played the barrier and closed it. Normally, I let the half run.
  • #332
  • Jul 27, 2011 1:32am Jul 27, 2011 1:32am
Quoting xXTrizzleXx
I'm kind of in the same boat as you, and the thinking is that the EUR/USD position will be ripe for the picking come resolution of the debt ceiling issue..I'm even thinking of a means to take profit by the end of the week just in case things get unpredictable. However with all the attention on the US right now, the market isn't really taking note of the EZ, despite widening periphery spreads. When it starts acting up again I'll be looking at EUR/CHF again.
I think it is good that market doesn't have multi-focus. If it did, the situation would have been like the one during July first half. The market was so confusing for me. And as I am trading only E/U intraday, dint have many opportunities.
  • #333
  • Jul 27, 2011 1:49am Jul 27, 2011 1:49am
Quoting vicky_ag
I got in AU yesterday during the consolidation. Thanks to strangley performing Oanda Android app (caused me a 6% loss on E/U) , I played the barrier and closed it. Normally, I let the half run.
Lol had you not we would have had what, mirror positions?

Quoting vicky_ag
I think it is good that market doesn't have multi-focus. If it did, the situation would have been like the one during July first half. The market was so confusing for me. And as I am trading only E/U intraday, dint have many opportunities.
The multifocus I like is where both scenarios have outcomes you are fairly sure about, so that it's only a matter of timing that can make a pretty sweet trade. First half of July was messy - definitely feel you on that one!

Regards,
xXTrizzleXx
  • #334
  • Jul 27, 2011 2:32am Jul 27, 2011 2:32am
Quoting xXTrizzleXx
Lol had you not we would have had what, mirror positions?
Yeah.Feaky, eh?
  • #335
  • Aug 1, 2011 6:02am Aug 1, 2011 6:02am
Hey guys, like I've previously said, my latest focus has been on USD/JPY, where I had 3 positions, but opted to close one out to book some profit. I have moved the stops on all positions to lock in some meager profit, but I don't think my stop will be threatened. In the short-term, I see the path of least resistance being to the downside for the following reasons:

 

  1. Even if the US passes the latest debt ceiling agreement in the House and Senate, the $2.4 trillion in spending cuts is way off the $4.0 trillion mark S&P would have liked to see, meaning that the threat of a downgrade of a notch or two is still valid.
  2. I'm expecting to see some soft US data this weak, and will be looking to trade the ISM and NFP reports.
  3. Good speculative interest in the form of options and stops until 75, makes it a tempting place for me to put my target. I'm thinking that I should set my TP somewhere between 76/75

I'm thinking that a breach of 75 would both please the market from a speculative point of view, and would motivate the BoJ/MoF to act, especially due to pressure from business lobbies, as the USD/JPY is 5 big figures from hedging/accounting levels used by multinational Japanese firms.

That of course assumes that the relief rally caused by the passage of the debt ceiling rally will be short-lived, and therein lies the real risk of this trade. If the very short USD/JPY market decides to cover very quickly, MoF/BoJ may even use that to exacerbate their intervention, seeing as they want it to have a very significant effect, and considering they may act unilaterally.

However my gut feeling is that the rally would be short-lived, as prospects of a US slowdown may be used as a proxy excuse to gun the interest lieing beneath the all-time lows.

That being said, I'm going to be doing some thinking as to how to scale in to a long positions in USD/JPY, NZD/JPY, AUD/JPY or CHF/JPY.

Regards,
xXTrizzleXx

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  • #336
  • Aug 1, 2011 8:16am Aug 1, 2011 8:16am
That was a very informative and well-written overview of your current thinking. In fact I share your opinion when it comes to the effect of any debt deal in the US - I too think the positive effect will be short-lived. The current proposed deal falls short of the 4 trillion mark, but it also doesn't do much in terms of austerity. They are talking about cuts just like in the UK, but what they mean is increasing spending less than they previously planned. Net-net that's not a cut because spending will still be increasing (Cameron and Osbourne haven't cut spending either, they've only decreased the rate at which the increase spending). On top of that we have economic weakness. The recent GDP restatements actually put the US economy below the 2007 top, which means the current recovery is very weak indeed. See here for charts: http://scottgrannis.blogspot.com/201...inflation.html

As to how to play this, I've really got no idea. The situation is far too dynamic to allow for any intermediate term, let alone long term planning to be done. We'll have to live and see.

Quoting xXTrizzleXx
That being said, I'm going to be doing some thinking as to how to scale in to a long positions in USD/JPY, NZD/JPY, AUD/JPY or CHF/JPY.
I would wait a bit until you have fundamentals on your side. The current economic weakness witnessed in Europe and the US is actually global (see links below).

Citigroup Economic Surprise Index
United States
Major Economies (G7 I think)
Emerging Markets
Latin America
If you don't risk, you don't ever have to lose.
  • #337
  • Aug 1, 2011 9:48am Aug 1, 2011 9:48am
Quoting xXTrizzleXx
Hey guys, like I've previously said, my latest focus has been on USD/JPY, where I had 3 positions, but opted to close one out to book some profit. I have moved the stops on all positions to lock in some meager profit, but I don't think my stop will be threatened. In the short-term, I see the path of least resistance being to the downside for the following reasons:
[list][*]Even if the US passes the latest debt ceiling agreement in the House and Senate, the $2.4 trillion in spending cuts is way off the $4.0 trillion mark S&P would have liked...
always worth a peak into your journal.. always find something interesting to check into



PS: all time lows via usd/jpy!
  • #338
  • Aug 1, 2011 9:57am Aug 1, 2011 9:57am
Heya bug,

Quoting bug
That was a very informative and well-written overview of your current thinking.
Thanks man.

Quote
In fact I share your opinion when it comes to the effect of any debt deal in the US - I too think the positive effect will be short-lived. The current proposed deal falls short of the 4 trillion mark, but it also doesn't do much in terms of austerity. They are talking about cuts just like in the UK, but what they mean is increasing spending less than they previously planned. Net-net that's not a cut because spending will still be increasing (Cameron and Osbourne haven't cut spending either, they've only decreased the rate at which the increase...
It's like these people can't get anything right!

Quote
On top of that we have economic weakness. The recent GDP restatements actually put the US economy below the 2007 top, which means the current recovery is very weak indeed. See here for charts: http://scottgrannis.blogspot.com/201...inflation.html
Yep, it seems as you've pointed out that we're poised for a global slowdown. The horrible ISM numbers only cement this outlook. Although it was stated that the bar for QE3 is quite high due to the increased inflation, if the slowdown continues, decreases in the prices of commodities may quell said inflation and give the stimulus hawks renewed confidence.

Quote
I would wait a bit until you have fundamentals on your side. The current economic weakness witnessed in Europe and the US is actually global (see links below).
Actually despite the fact that I'm scaling in, the trade should be short-term at best, as I'm only playing these XXX/JPY pairs long in hopes of catching the huge intervention flows. I'm thinking that something like CHF/JPY though has the potential to be a runner based on risk aversion/safe haven flows; or NZD/JPY based on the removal of the emergency interest rate cut due to the Christchurch Earthquakes.

Good luck,
xXTrizzleXx
  • #339
  • Aug 1, 2011 9:59am Aug 1, 2011 9:59am
Quoting newyear498
always worth a peak into your journal.. always find something interesting to check into

PS: all time lows via usd/jpy!
Good to see you around these parts, newyear498 Hope you're catching some of those pips.

Regards,
xXTrizzleXx
  • #340
  • Aug 1, 2011 10:21am Aug 1, 2011 10:21am
Quoting xXTrizzleXx
Good to see you around these parts, newyear498 Hope you're catching some of those pips.

Regards,
xXTrizzleXx
yeah was talking about this before how japan was looking ripe..

I'm open to the idea it may continue lower but at this point the positions are closed as I'm expecting central bank intervention.. any thoughts on this?

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