I bought the CAD May 3rd 0.715 put for 0.0006. I am looking for USDCAD to make a move to 1.375/1.38, and would monetize there for 3-5x cost. I like this is as a risk-off hedge.
Per my note on FX this morning, I took this off at cost for flat PnL on this. This is not yet the time for divergence trades. That should come mid year when other CBs need to cut and Fed still cannot.
Some interesting articles that support this view. Trade is flattish since inception but USD rates look like they're about to explode. and per the below, policy is biting in Canada.
That’s the kicker , those aspects of the economy have been keeping it afloat. They’re really the only sources of strength, so imagine how weak growth would be without it. Already we’re talking about a slower pace of immigration this year which will mean less coming from this going forward.
It's the expiry of the CAD futures contract. Per my comments above, I have not yet pulled the trigger, but your points are very valid. Vols are very cheap, and outright puts are better. I am trying to buy the May 3rd 0.715 put for 0.0005, and plan to target 3-5x payout. FX futures options are sometimes less liquid and I haven't gotten filled yet, so may have to revisit Monday.
I think readers should choose the sizing that fits their own risk tolerances. That being said, I am planning on posting an "Options Almanac" note that discusses how I think of sizing as it relates to conviction levels on trades.
Right, I guess I'm mostly asking for relative sizing, i.e. how would you size your put fly compared to your 2 day spy put. If that were in units, users can scale to their tolerance.
I like where this is going, good luck with the substack!
I bought the CAD May 3rd 0.715 put for 0.0006. I am looking for USDCAD to make a move to 1.375/1.38, and would monetize there for 3-5x cost. I like this is as a risk-off hedge.
if you wanna dabble in a macro rates expression check out CAD 2s30s cash curve vs the globe o.O
Per my note on FX this morning, I took this off at cost for flat PnL on this. This is not yet the time for divergence trades. That should come mid year when other CBs need to cut and Fed still cannot.
Some interesting articles that support this view. Trade is flattish since inception but USD rates look like they're about to explode. and per the below, policy is biting in Canada.
https://www.bloomberg.com/news/articles/2024-02-27/rising-loan-delinquencies-bring-pain-to-bmo-scotiabank-results?srnd=homepage-canada&sref=yms2mtRu
https://www.bloomberg.com/news/articles/2024-02-27/bank-of-montreal-cuts-exposure-to-ultra-long-mortgages-in-canada?sref=yms2mtRu
how is it possible Canada is so week despite mass imigration (much higher spending in economy) and relatively good commodities pricing?
That’s the kicker , those aspects of the economy have been keeping it afloat. They’re really the only sources of strength, so imagine how weak growth would be without it. Already we’re talking about a slower pace of immigration this year which will mean less coming from this going forward.
Thanks Danny, is the April 5th expiry chosen due to BOC March 6 meeting and FOMC on March 20? Vol cheap, why not buy straight PUTs with longer expiry?
It's the expiry of the CAD futures contract. Per my comments above, I have not yet pulled the trigger, but your points are very valid. Vols are very cheap, and outright puts are better. I am trying to buy the May 3rd 0.715 put for 0.0005, and plan to target 3-5x payout. FX futures options are sometimes less liquid and I haven't gotten filled yet, so may have to revisit Monday.
See above. I did buy this option.
Thanks!
For these option trades, is it possible to also post a relative allocation? E.g in unit terms, or % of aum?
I think readers should choose the sizing that fits their own risk tolerances. That being said, I am planning on posting an "Options Almanac" note that discusses how I think of sizing as it relates to conviction levels on trades.
Right, I guess I'm mostly asking for relative sizing, i.e. how would you size your put fly compared to your 2 day spy put. If that were in units, users can scale to their tolerance.
I like where this is going, good luck with the substack!
Yes, will all be in that piece. Working on it this weekend.