Eploiting the EUR/CHF 1.2 minimum exchange rate

[Arbu]

I've been exploiting it already. My lunch in Geneva yesterday only cost me £62 against the £67 it would have cost me the day before. Bargain!

 

[Martinghoul]

I know f*ck all about the mechanics of the bond market, so don't take my opinion too seriously, but to me it seems that letting Greece and company leave the euro until they sort their spending problems out would be best for everyone involved - going back to printing their own currency and issuing debt in it would surely push the yields on their bonds to a more manageable level.

The US keeps (correctly) claiming that they cannot default as long as they can print the currency in which they owe debts and the same is true for Greeks and any other country that issues bonds denominated in the currency that they control. As for the argument that printing money to pay off debts would lead to inflation - sure it would, but since the bond holders would be the first in line to spend that freshly created money they would get to spend it before it lost purchasing power... And once default becomes less likely the yields go down, no?

Now, please enlighten me as to why I'm wrong

You're not wrong at all...

 

[Arbu]

Has anyone thought about the implications of the the SNB limiting the EUR/CHF exchange rate to no less than 1.2? Are volume and volatility going to dry up completely in this pair, or is it going to flirt with the 1.2 level with the occasional move up (but never below). Finally, are sharp spikes below 1.2 to be expected?

I'm trying to figure out if it will be possible to do some very low risk scalping by buying it every time it touches, say, 1.2005 with a stop at 1.195 and a tp at 1.2015-25... Any thoughts??

Any joy today? Would have worked well if your figures had had one less zero i.e. 1.205 and 1.215.

 

[options-george]

Any joy today? Would have worked well if your figures had had one less zero i.e. 1.205 and 1.215.

Hi AFK. It's funny that you mention this. This is in fact pretty much what I did. Apologies I had not seen your thread earlier! Just like you, I had been wondering how to work with the line in the sand.

I figured that there should be some very strong support from SNB at 1.2000 but also would expect a tonne of short orders just below there so I sat a stop at 1.197. I had sent a buy order of 1.2042, which took several days to fill. So 72 pip stop, and a target of 1.2144. Needless I was smiling yesterday, when my position hit full profit on the rumor for +1.46%.

My thinking was that the chance of hitting my target at some point prior to hitting my stop was well above 50%, so I figured this was a positive EV trade.

That said, I think there is good opportunity for further trades with this pair.

 

[Arbu]

Yes I was positioned long as well. But more on the basis that what was going on was just random noise above the 1.2 level. Unfortunately I saw the move at its start and closed out in its early stages. Still an OK profit.

 

[wackypete2]

Hi AFK. It's funny that you mention this. This is in fact pretty much what I did. Apologies I had not seen your thread earlier! Just like you, I had been wondering how to work with the line in the sand.

I figured that there should be some very strong support from SNB at 1.2000 but also would expect a tonne of short orders just below there so I sat a stop at 1.197. I had sent a buy order of 1.2042, which took several days to fill. So 72 pip stop, and a target of 1.2144. Needless I was smiling yesterday, when my position hit full profit on the rumor for +1.46%.

My thinking was that the chance of hitting my target at some point prior to hitting my stop was well above 50%, so I figured this was a positive EV trade.

That said, I think there is good opportunity for further trades with this pair.

I don't normally trade this pair but I would place a sell stop at 1.1990. I agree with you there are probably heavy short orders around there so I'd be looking for 20-40 quick pips.

Congrats to those who made some money on this pair recently

Peter

 

[Arbu]

It seemed for a while like it was bouncing up off 1.22 whenever it got close. Then this afternoon it fell through and has never really got back above this level. 1.22 seems to be providing resistance rather than support now, if anything.

 

[arabianights]

anyone else looking forward to the next "I owe IG Index 92K" thread from some of the more special folk trading this? SNB can and may move to 1.50 any time - it is probably true that the range will tighten as SNB rumours calm down a wee bit (and by the way, the entire reason it moved up to 1.23+ recently was cause of a swiss bank report that SNB was gonna move to 1.25 - that was very well known but apparently it ain't been mentioned here - but obviously the charts hold all the information) and so I expect "scalpers" to start lumping on size in nill volality... then lulz will ensue :clap:

 

[Arbu]

I don't normally trade this pair but I would place a sell stop at 1.1990. I agree with you there are probably heavy short orders around there so I'd be looking for 20-40 quick pips.

Congrats to those who made some money on this pair recently

Peter

Didn't happen recently when it hit 1.9963. Maybe stops are lower than that. Or maybe SNB is too quick to react.

So anyone still doing this? Rate is now back down close to 1.2 and seems to have flattened out.

 

[Martinghoul]

1.9963 printed in the interdealer mkt that doesn't have access to the SNB, so not really meaningful.

 

[new_trader]

I know f*ck all about the mechanics of the bond market, so don't take my opinion too seriously, but to me it seems that letting Greece and company leave the euro until they sort their spending problems out would be best for everyone involved - going back to printing their own currency and issuing debt in it would surely push the yields on their bonds to a more manageable level.

The US keeps (correctly) claiming that they cannot default as long as they can print the currency in which they owe debts and the same is true for Greeks and any other country that issues bonds denominated in the currency that they control. As for the argument that printing money to pay off debts would lead to inflation - sure it would, but since the bond holders would be the first in line to spend that freshly created money they would get to spend it before it lost purchasing power... And once default becomes less likely the yields go down, no?
Now, please enlighten me as to why I'm wrong

This isn't entirely correct.

 

[scose-no-doubt]

Oh ffs

 

[YouAreNotFree]

Have been this week.

3 trades buying at 1.2017 and covering at 1.2028.

 

[Arbu]

Yeah, I've done it a couple of times this week at similar levels. Don't think I'd want to keep a position open over the weekend though - I know it's not likely but if the SNB were to declare it were cancelling its support over the weekend the slippage would be terrible.

 

[Shakone]

Yeah, I've done it a couple of times this week at similar levels. Don't think I'd want to keep a position open over the weekend though - I know it's not likely but if the SNB were to declare it were cancelling its support over the weekend the slippage would be terrible.

What makes you think it won't gap sharply following such an announcement even during the week?

 

[Arbu]

I suppose I imagine that some people might have suspicions a short while before, e.g. because it was clear that an announcement of some sort was about to be made, and some people might be slower to realise, so the price movement wouldn't be instantaneous. But I could be wrong.

One question is whether the price gapped when the policy was initially announced, back in September. I suppose it could be expected to behave similarly if the policy was abandoned. I don't have enough data on my charts to tell me whether it did.

 

[scose-no-doubt]

Well the ask was at 110 and they went to market with 120 bid lol

 

[marbig]

Has anyone thought about the implications of the the SNB limiting the EUR/CHF exchange rate to no less than 1.2? Are volume and volatility going to dry up completely in this pair, or is it going to flirt with the 1.2 level with the occasional move up (but never below). Finally, are sharp spikes below 1.2 to be expected?

I'm trying to figure out if it will be possible to do some very low risk scalping by buying it every time it touches, say, 1.2005 with a stop at 1.195 and a tp at 1.2015-25... Any thoughts??

I have taken the other (opposite) approach to this situation.
Instead of scalping / buying it, I am taking position trades against the Eur/Chf holding.
http://www.trade2win.com/boards/gen...igh-reward-soros-style-trade.html#post1828230

PS Since your original post back on September 6 2011 (8 months ago), you would have only had ONE opportunity to ' do some very low risk scalping by buying it every time it touches, say, 1.2005 with a stop at 1.195 and a tp at 1.2015-25.'
It was on April 5 2012 and you would have lost on the trade because it would have been stopped out

 

[Arbu]

Well the ask was at 110 and they went to market with 120 bid lol

So it gapped up, and people with short positions lost a lot of money, in spite of having stop losses in place?

And presumably marbig thinks it would gap down if the SNB terminated its policy. Otherwise he would be placing sell orders at 1.199 (say) rather than choosing to sell now at just above 1.2 and risking the peg being raised.

 

[marbig]

And presumably marbig thinks it would gap down if the SNB terminated its policy. Otherwise he would be placing sell orders at 1.199 (say) rather than choosing to sell now at just above 1.2 and risking the peg being raised.

You are indeed correct, Arbu.

When (and not if) the SNB terminates its policy of trying to hold back the tide, the market will gap down hundreds of pips. So there would be no point in having your sell order at 1.199 (or anything even remotely close to that number).

Have a look at the current trading of the EUR/CHF. In my opinion, I believe that the risk reward ratio is very strongly biased towards the collapse of the (artificial) Swiss National Bank price level of 1.2000.

The fundamentals of the Euro are getting much worse: May 6 is a day of reckoning for Europe’s leaders as France votes for a new president, Greece for a new parliament, and Italy goes to the polls for local elections. German state elections follow. On May 31, Ireland is holding a referendum on Europe’s fiscal pact. In June, France has parliamentary elections. Then the Netherlands will go to the polls. As these countries each move more to the left, the flood of money moving into the Swissie is becoming a torrential flood.

So we are looking at a trade that may happen as soon as next week or maybe as late as the end of May. I am prepared to hold a trade over that period of time for (what I believe is) a low risk /very high reward trade opportunity.