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.
Trade Alert – (FXY)
Buy the Currency Shares Japanese Yen Trust (FXY) May, 2013 $103-$106 in-the-money bear put spread at $2.40 or best
Note: This is the first of our May options positions
expiration date: May 17, 2013
Portfolio weighting: 10%
Number of Contracts = 42
Looks like we are getting another straight line move down in the yen, this time targeting ¥100, or down another 3% from here. Last night was my first in six months without a short yen position, and what does it do? Drop a full 120 basis points.
So I am going to pay up here in terms of risk and strikes and put back on another 10% position. This is our big money maker for the year. What endurance this currency has! This is a six week few expiring on May 17, so it should work. Other than profit taking on existing shorts, I doubt you’ll see any real buying of the yen in the wake of the BOJ’s momentous move yesterday for quite some time.
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 42 May, 2013 (FXY) $106 puts at……………$5.60
Sell short 42 May, 2013 (FXY) $103 puts at..…….$3.20
Profit at expiration: $3.00 – $2.40 = $0.60
(42 X 100 X $0.60) = $2,520 or 2.52% profit for the notional $100,000 portfolio.