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) – Expiration
Expiration of the Short position in the Currency Shares Japanese Yen Trust August, 2012 (FXY) $127-$130 call spread
expiration date: August 17, 2012
Portfolio weighting: 15% = 45 contracts
This was a bet that the Currency Shares Japanese Yen Trust August, 2012 (FXY) would trade at or below $127.40 on the August 17 expiration. As it turned out, the ETF closed at $123.46, miles away from going in the money. This renders our short position worthless, and we can close the position at the maximum profit. The margin should be returned to your account on Monday.
As expected, the yen stagnated against the dollar in the face of continued inaction by the Bank of Japan. Japanese industry continues to bleed. Nobody cares. The Japanese government continues in disarray.
Your total profit should amount to (45 X 100 X $0.35) = $1,575. That gives you a profit on this three week play of 1.58% for the notional $100,000 model portfolio. This is the same as taking out a full ?1.25 out of the cash market on a non-leveraged basis.
I have already put on a similar position for the September expiration to take in another $1,575, or 1.58% for the notional $100,000 model portfolio. This is like having a rich uncle in Japan who writes me a check every month.
There is always the chance the Bank of Japan gets off its duff and engages in more, much needed, quantitative easing and foreign exchange market intervention, driving the dollar back up to ?85. In that case, the value of this short call spread vaporizes in a nanosecond. But holding your breath for decisive action from the Japanese has never proven a viable long term strategy.
I am happy to point out that this is the 12th consecutive profitable closing position for my Trade Alert Service. On to the next one.
Thank You Madame Butterfly