As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.
Further Explanation to: Trade Alert – (FXY)
Buy the Currency Shares Japanese Yen Trust (FXY) October, 2013 $102-$105 in-the-money bear put spread at $2.65 or best
expiration date: October 18, 2013
Portfolio weighting: 10%
Number of contracts = 38 contracts
It is clear now that the market is bunching up war fears on Fridays, and then dissipated them on Mondays when the missiles fail to appear. Today, this pattern is giving us a nice opportunity to bulk up our short position in the yen by adding the Currency Shares Japanese Yen Trust (FXY) October, 2013 $102-$105 in-the-money bear put spread.
The world is adding risk, expecting major bull moves, once it becomes clear that the multiple disasters now threatening the world don’t actually happen. The list includes war with Syria, the taper, the Bernanke replacement, the debt ceiling crisis, another sequester, yada, yada, yada. A yen short is one of many ways to achieve this.
This is why US stocks refuse to sell off in any meaningful way. We are setting up for a great “buy the rumor, sell the news” event. Remember when the first Gulf War started in 1991? Stocks drifted for six months in the run up, then soared once the bombs actually fell. We could be in for another one of those. That would take the yen and the euro to new lows for 2013.
Count on president Obama to draw out the Syria crisis for as long as possible. This gives the message of the coming military action the greatest political impact internationally. It also boosts his own political fortunes at home, leaving the Republicans drifting in the wind. Why be in a hurry to end it? They are now in the uncomfortable position of having to turn pacifist, after supporting Middle Eastern wars for the last 11 years.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don’t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 38 October, 2013 (FXY) $105 puts at……………$6.60
Sell short 38 October, 2013 (FXY) $102 puts at..…….$3.95
Profit at expiration: $3.00 – $2.65 = $0.35
(38 X 100 X $0.35) = $1,330 or 1.33% profit for the notional $100,000 portfolio.