Follow Up to Trade Alert - (FXY) November 21, 2013
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 Update to: Trade Alert -(FXY)
Sell the Currency Shares Japanese Yen Trust (FXY) December, 2013 $101-$104 in-the-money bear put spread at $2.95 or best
Closing Trade
11-21-2013
expiration date: December 20, 2013
Portfolio weighting: 10%
Number of Contracts = 38 contracts
This is my 14th consecutive closing Trade Alert, and the 20th including my remaining profitable open positions. I have only six more to go until a break my previous record of 25. It doesn?t get any better than this.
The yen is now in free fall, and the Japanese stock market is going ballistic, as I expected. Both the ProShares Ultra Short Yen double short ETF (YCS) and the Wisdom Tree Japan Hedged Equity ETF (DXJ) have pierced new five-month highs, and loftier levels beckon.
The immediate trigger was a meeting at the Bank of Japan, where the governors voted to maintain their ultra low, 0.1% discount rate. They also reiterated their commitment to growing the money supply by a blistering $600-$700 billion a year, or nearly triple the US monetary easing rate on a per capita GDP basis.
On the same day, we received month old Fed minutes showing a definite lean towards tapering our own quantitative easing. When this eventually does happen, the interest rate differential for dollar/ yen with rise dramatically. Needless to say, this is all terrible news for Japan?s beleaguered currency, as interest rate differentials are the primary drivers of foreign exchange markets.
Given all this, I am going to take profits on my existing short position in the yen through the Currency Shares Japanese Yen Trust (FXY) December, 2013 $101-$104 in-the-money bear put spread. At this mornings shockingly high prices for the spread, we can harvest 83% of the potential profit with one full month still to run to the December 20 expiration.
The outlook for the yen is not so bleak that I want to have plenty of cash to reload on the short side during the slightest recovery. I will move to closer strikes and more distant maturities to maximize your profits. It is now looking like we will soon challenge the 2013 low for the (FXY) of $94.80, and the $72 high for the (YCS).
We have a lot of new readers on board now, as my white-hot performance has become a talking point in the hedge fund community. So for the newbies to familiarize themselves with the basic structural flaws in the yen, please click here ?http://madhedgefundradio.com/rumblings-in-tokyo-2/, here http://madhedgefundradio.com/new-boj-governor-craters-yen/, and finally here http://madhedgefundradio.com/new-boj-governor-crushes-the-yen/.
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.
If you can?t do the options then buy the short yen ETF (YCS) outright. We could be in for some mileage here.
Here are the specific trades you need to execute this position:
Sell 38 December, 2013 (FXY) $104 puts at?????$7.30
Buy to cover short 38 December, 2013 (FXY) $101 puts at...$4.35
Net Cost:??????????????????.....$2.95
Profit at expiration: $2.95 - $2.70 = $0.25
(38 X 100 X $0.25) = $950 or 0.95% profit for the notional $100,000 portfolio.
