a free gift to total newbies from MajorDutch

[meanreversion]

Still not sure why you'd choose to trade, e.g. AUD/DKK, because I'm sure the bid/ask is much wider. The volatility of EUR/DKK is of no consequence, so trading EUR/AUD would be far more sensible.

 

[camembert]

Being long (or short, depends on what you think happens) DKK is a free (not quite, but, let's say, cheep) Eurogeddon option. And I mean mostly through EURDKK.

ok, so when something is so heavily dependent on one particular event, you can treat it like an option on that event occuring, even though what you are buying is not an option?

like, could I say for example, there is optionality in a pharma stock because of an FDA approval?

 

[camembert]

Still not sure why you'd choose to trade, e.g. AUD/DKK, because I'm sure the bid/ask is much wider. The volatility of EUR/DKK is of no consequence, so trading EUR/AUD would be far more sensible.

unless, say, you had just trawled through a list of crosses as long as your arm, only paying attention to whether there was a candlestick pattern near an imaginary line on the graph, without actually understanding anything about it :whistling

 

[Martinghoul]

ok, so when something is so heavily dependent on one particular event, you can treat it like an option on that event occuring, even though what you are buying is not an option?

like, could I say for example, there is optionality in a pharma stock because of an FDA approval?

Yeah, except that there's smth special about DKK. Specifically, in normal times DKK is pegged to the EUR, so, basically, the cross doesn't move, until, one day, it might just decide to move.

 

[meanreversion]

unless, say, you had just trawled through a list of crosses as long as your arm, only paying attention to whether there was a candlestick pattern near an imaginary line on the graph, without actually understanding anything about it :whistling

That doesn't happen, shurely

 

[camembert]

Yeah, except that there's smth special about DKK. Specifically, in normal times DKK is pegged to the EUR, so, basically, the cross doesn't move, until, one day, it might just decide to move.

so for something to have any meaningful "optionality", the optionality part needs to be a significant enough part of the price to make it worthwhile?

so, like, the spoos has optionality on payrools, but also optionality on a thousand other things too, which means there isn't really any tangible optionality in it at all?

 

[camembert]

That doesn't happen, shurely

106 to go, are you gonna finish on a peak?

 

[Martinghoul]

so for something to have any meaningful "optionality", the optionality part needs to be a significant enough part of the price to make it worthwhile?

so, like, the spoos has optionality on payrools, but also optionality on a thousand other things too, which means there isn't really any tangible optionality in it at all?

Yeah, precisely... To me "optionality" is a sort of a nebulous concept that is defined by a possibility of a price moving quickly and very sharply (relative to the normal state of affairs) under some special circumstances. At the same time, in normal circumstances, price should be expected to move very little. In that case, having this trade on feels like being long an option, 'cause it has a similar payoff. So being short subprime housing in 2008 had all sorts of optionality, etc etc.

 

[camembert]

Yeah, precisely... To me "optionality" is a sort of a nebulous concept that is defined by a possibility of a price moving quickly and very sharply (relative to the normal state of affairs) under some special circumstances. At the same time, in normal circumstances, price should be expected to move very little. In that case, having this trade on feels like being long an option, 'cause it has a similar payoff. So being short subprime housing in 2008 had all sorts of optionality, etc etc.

like when kyle bass talks about assymmetric hedges? it's got an attractive "opionality" element to it if the payout is skewed more to the upside if you're right than the downside if your wrong?

 

[Martinghoul]

like when kyle bass talks about assymmetric hedges? it's got an attractive "opionality" element to it if the payout is skewed more to the upside if you're right than the downside if your wrong?

Precisely... Not that I am a fan of Kyle Bass or anything, but he's definitely referring to that.

 

[camembert]

well that is good to know, thanks for explaining. I've seen it banded about by folks more cleverer than me and never really understood what was meant by it.

I have a lot of optionality in my life, like when I talk to smoking ht chicks in bars. Upsides massively outweigh the downsides, but normally nothing happens :-/

 

[DionysusToast]

This thread needs another thread explaining what on earth it's all about...

 

[scose-no-doubt]

optionality = means of getting the exposure you require

e.g. Full Greece bail out = Long Greek bonds

I think...

 

[Martinghoul]

well that is good to know, thanks for explaining. I've seen it banded about by folks more cleverer than me and never really understood what was meant by it.

I have a lot of optionality in my life, like when I talk to smoking ht chicks in bars. Upsides massively outweigh the downsides, but normally nothing happens :-/

That, my friend, is the perfect summation of optionality! (of course, you have to make sure that you're not exercising the "Crying Game" option, so to speak).

 

[scose-no-doubt]

Wonder is they're gobble everything right up or just absorb everything at and around the floor

 

[scose-no-doubt]

Euro/Swiss Franc Positions at Record; Traders Bet on SNB Intervention | DailyFX

 

[scose-no-doubt]

Would the SNB even have to act if a Greek resolution becomes more likely?

 

[wackypete2]

Good article from dailyfx.com. The article indicates that 96% of the sample of RETAIL traders are long and implies many of them are underwater waiting for some intervention. In turn this would suggest retail buying is drying up. It's the larger players are pushing the market down and with few buyers left it may not be hard to pop the retail stops below 1.200 before SNB enters the market.

Peter

 

[scose-no-doubt]

My thoughts exactly mate. Just depends on the perception the big boys have on SNB commitment to the 120.

 

[scose-no-doubt]

Greece close to landing crucial debt deal

http://www.charlotteobserver.com/2012/01/31/2974505/blaming-the-messenger-greeces.html