11 Feb 2015
Trading USD/JPY and Gold using options – ORE
FXStreet (Barcelona) - Merav Brenner of ORE, shares an options strategy with limited risk and a probable immense profit using USD/JPY and XAU/USD, using the correlation between them to its maximum advantage.
Key Quotes
“USD/JPY is trading at its highest level in a month and gold (XAU/USD) around its lowest after the dramatic decline February 6.”
“Over the past month, the correlation between the two pairs have gone from around +50% to a complete reverse, now at ‐65%”
“A position I find interesting is buying a Call in both pairs with the expectation that both have room and reason to climb and not much ground to decline. Yet, the two pairs have a negative correlation which gives a hedged position; if the pairs don’t trade up, there is a good chance they will trade in opposite directions rather than in the same direction down.”
“Hence, if a position is made with both a Call in the XAUUSD and the USDJPY, with the same premium, the risk is limited and potential for profit is immense.”
“XAUUSD 7 days Call ATM (at‐the‐money) on 50 units = $659.65”
“USDJPY 7days Call ATM 100,000 = 79,273.53JPY = $661.6882”
Key Quotes
“USD/JPY is trading at its highest level in a month and gold (XAU/USD) around its lowest after the dramatic decline February 6.”
“Over the past month, the correlation between the two pairs have gone from around +50% to a complete reverse, now at ‐65%”
“A position I find interesting is buying a Call in both pairs with the expectation that both have room and reason to climb and not much ground to decline. Yet, the two pairs have a negative correlation which gives a hedged position; if the pairs don’t trade up, there is a good chance they will trade in opposite directions rather than in the same direction down.”
“Hence, if a position is made with both a Call in the XAUUSD and the USDJPY, with the same premium, the risk is limited and potential for profit is immense.”
“XAUUSD 7 days Call ATM (at‐the‐money) on 50 units = $659.65”
“USDJPY 7days Call ATM 100,000 = 79,273.53JPY = $661.6882”