Follow Up to Trade Alert - (FXY) June 11, 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 Explanation to: Trade Alert - (FXY) Stop Loss

Buy the Currency Shares Japanese Yen Trust (FXY) July, 2013 $105-$108 in-the-money bear put spread at $2.45 or best

?Opening Trade

6-11-2013

expiration date: July 19, 2013

Portfolio weighting: 10%

Number of Contracts =41 contracts

 

Thanks to the dramatic 8% pop in the Japanese yen over the past three weeks, and the general ?RISK OFF? sentiment, implied volatilities on put options are now through the roof. This gives us a rare opportunity to strap on put spreads much father out of the money than usual, and still make a generous profit. With only five weeks to expiration for the July series, we will also pick up some nice accelerated time decay.

The Currency Shares Japanese Yen Trust (FXY) July, 2013 $105-$108 in-the-money bear put spread allows for a full 10% rally in the Japanese currency and still reap the maximum profit. This is a huge amount of room in the currency markets.

All we are seeing is some long overdue profit taking on massive short positions that have been the most profitable hedge fund trades of 2013. We have already cleaned out much of the hot margin positions, the liquidation of which caused the recent volatility.

I? still think ?110 is in the cards in the run up to yearend. If anything, Japan?s hyper aggressive quantitative easing is accelerating, not slowing down, and that should continue to knock the stuffing out of the currency, once we get through this rough patch.

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 41 July, 2013 (FXY) $108 puts at?????$7.10

Sell short 41 July, 2013 (FXY) $105 puts at..??.$4.65
Net Cost:????????????????.....$2.45

Profit at expiration: $3.00 - $2.45 = $0.55

(41 X 100 X $0.55) = $2,255 or 2.26% profit for the notional $100,000 portfolio.