A low-risk/high reward Soros Style trade

Martinghoul

Well-known member
Feb 3, 2009
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#34
Hi MG,

I made the point mainly because I wanted to call Soros "Sore-ar$e", and one doesn't often get the chance to do that as often as one would like.

I assumed that we were talking about the free(ish) countries, but of course you are right about China. Even accepting that this is a special case, I did say "in the end" - 20 years is nothing really, they can keep it going longer than that.
True, but, obviously, we're now beyond any sort of a realistic trading time horizon for a punt like this. If you have to wait 20 years for your trade to work, wearing all sorts of volatility in the meantime (i.e. SNB moving the peg to 1.30 or smth), I humbly suggest that it's a sh1t trade. This is in stark contrast to the Soros trade, the main beauty of which was great timing, rather than the fundamental economic rationale.
 

marbig

Active member
Feb 26, 2011
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#35
There has been some interesting discussions and differing points of view expressed since I posted my initial post. I guess that is what makes a market: some people have different views on where a currency pair is going and the speed at which it may get there.

My trade (I have sold at 1.2025) is a long term trade.
My trade is based on the Eur/Chf falling to almost parity (1.0064) in August 2011. The SNB threw a large pile of money at the Euro in Sept which caused the market to move immediately and strongly up above the 1.20 level, where it has remained.

But, on Thursday of last week, the SNB threw ANOTHER €1billion (£825m) at the market (to weaken the Swissie by buying Euros) and yet the Eur/Chf market barely moved. :-0 :-0

Clearly, the Money markets/hedge funds were clearly prepared to sell as many of their Euros to the SNB as the SNB was prepared to buy, because the Eur/Chf simply did NOT go up.

And, if given the opportunity of betting whether a market will defeat a Central Bank over a set currency level, I will always back the market to win in the end. (And I think the end is not far away in this case. The SNB will not keep buying Euros that are dropping in value)

I have thrown the trade suggestion out there as a conversation starter, because I thought it was an interesting trade opportunity. I have personally taken the trade and will watch it work itself out. Hopefully, we may see it fall back to where it was before the SNB intervention in September at near parity. That will give me 2000 pips per trade lot.

PS I trade short term , long term and anything in between. This is only one of my trades.
As I said above, I trade short term , long term and anything in between. This is only one of my trades.

This is one of my longer term trades. It is a Sell and then hold trade.

I am sure that no-one would be interested in any of my other trades.
 

Martinghoul

Well-known member
Feb 3, 2009
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#36
As I said above, I trade short term , long term and anything in between. This is only one of my trades.

This is one of my longer term trades. It is a Sell and then hold trade.

I am sure that no-one would be interested in any of my other trades.
You're aware, I presume, that this is a negative carry trade? So selling and then holding actually costs you money? That's not a problem, per se, it's just that you need to be mindful of that.
 

marbig

Active member
Feb 26, 2011
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#38
You're aware, I presume, that this is a negative carry trade? So selling and then holding actually costs you money? That's not a problem, per se, it's just that you need to be mindful of that.
Thank you Martinghoul for your Introduction to Trading lesson.

I am a professional trader that has been trading for over 12 years. It is my sole source of income. And I live very well.
 

Martinghoul

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Feb 3, 2009
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#39
Thank you Martinghoul for your Introduction to Trading lesson.

I am a professional trader that has been trading for over 12 years. It is my sole source of income. And I live very well.
Whoa, why so sensitive? I didn't mean to insult or anything...
 

marbig

Active member
Feb 26, 2011
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#40
True, but, obviously, we're now beyond any sort of a realistic trading time horizon for a punt like this. If you have to wait 20 years for your trade to work, wearing all sorts of volatility in the meantime (i.e. SNB moving the peg to 1.30 or smth), I humbly suggest that it's a sh1t trade.
This is in stark contrast to the Soros trade, the main beauty of which was great timing, rather than the fundamental economic rationale.
You will not have to wait 20 years.
You will not have to wait 20 months.
You will not have to wait 20 weeks.
And I humbly suggest that it's NOT a sh1t trade.

When the market cracks the 1.20 eur/chf, it will be quick and when most people least expect it. So set your trades now in preparation.

And the main beauty of the Soros trade was NOT great timing. How long do you think Soros took to build his position.Do you think that he knew WHEN the GBP was going to crack? (The timing of the announcement by the BoE was a surprise to everyone)

The success of the Soros trade was his commitment and belief in the fundamental economic rationale that the GBP was being grossly (and artificially) overvalued for European Monetary Union purposes.
 

scose-no-doubt

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Apr 8, 2010
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#41
Likes: The Leopard

Martinghoul

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Feb 3, 2009
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#42
You will not have to wait 20 years.
You will not have to wait 20 months.
You will not have to wait 20 weeks.
And I humbly suggest that it's NOT a sh1t trade.

When the market cracks the 1.20 eur/chf, it will be quick and when most people least expect it. So set your trades now in preparation.

And the main beauty of the Soros trade was NOT great timing. How long do you think Soros took to build his position.Do you think that he knew WHEN the GBP was going to crack? (The timing of the announcement by the BoE was a surprise to everyone)

The success of the Soros trade was his commitment and belief in the fundamental economic rationale that the GBP was being grossly (and artificially) overvalued for European Monetary Union purposes.
I respectfully disagree with most of this. I can expand on the details, if you like.
 

marbig

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Feb 26, 2011
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#45
I see that the Swiss National Bank (SNB) has again intervened to hold the Euro/Swiss Franc to 1.20
Swiss National Bank steps back into currency markets - Telegraph

The Eur/Chf of 1.20 will collapse.

Any budding George Soros traders will know that a Central Bank that attempts to hold a currency at a specific level will ALWAYS get beaten by the market.
The Money Market/ Hedge fund sharks can smell the blood in the water as the SNB bleeds from all the Euros that it bought. (It has been buying Euros with Swiss francs so that the Swiss franc would be weaker).

The SNB is now taking sizable losses from its purchases of the Euro over the last 8 months when it started to try to weaken the Swissie. (The Swiss Govt is desperate to weaken the Swiss franc to keep its industries competitive)

But the STREAM of money from Greece to the safe haven of the Swiss Franc has turned into a RIVER of money as Spain and Portugal now weaken and their citizens also send their money to the Swissie safe haven.
It will soon turn into a FLOOD of money to the Swissie as Italy and France get weakened by the elections in the near future and the increase in bond yields.

(High reward) The fall in the euro/swissie is guaranteed by the inevitable and impending future TORRENTIAL FLOODING into the Swissie.
(Low risk) The chance of the SNB being able to engineer a substantial and ongoing weakening in the Swissie is neglible. NO country can continue indefinitely to buy Euros that keep falling in value.

In summary, SELLING the Eur/Chf is an exceptional low risk/high reward trade. It may take a while, but it will happen! (y)
Doubled my exposure to this trade today. Sold Eur/Chf at 1.2020.
Sold and hold.

Potential election of Hollande in France and problems in Holland are pushing Euro in my favour. The Swiss National Bank are now taking punishing losses on their purchases of the Euro.
It is costing them more and more each day to try to soften the effects of the flood of money flowing into the Chf