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)
Sell the Currency Shares Japanese Yen Trust (FXY) July, 2014 $98-$101 in-the-money bear put spread at $2.95 or best
Closing Trade
6-6-2014
expiration date: July 18, 2014
Portfolio weighting: 10%
Number of Contracts = 38 contracts
We are so far in the money with the Currency Shares Japanese Yen Trust (FXY) July, 2014 $98-$101 in-the-money bear put spread that the options have gone illiquid, with humongously wide spreads (that is a technical term). The only real prices you get are at the close.
Using last night?s closing mark of $2.95, we have already sucked 86% of the value out of this spread. The yen has fallen more since then. So, it?s time to move on, and there are bigger fish to fry. The risk/reward ratio for this spread is no longer favorable, as we are at the bottom of the recent trading range. We caught a full $1.50 point drop in the (FXY) with this short position.
I am betting that if you place a limit order at $2.95 at the close today, you?ll get done, as they take the weekend time decay out. If not today, then on Monday.
Mind you, I have not suddenly fallen in love with the yen here. The country of my former residence still has enormous problems to deal with. I think we are going to Y150 to the dollar in the cash market, or $65 in the (FXY), long term. This is just a trading call.
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:
Sell 38 July, 2014 (FXY) $101 puts at?????$6.00
Buy to cover short 38 July, 2014 (FXY) $98 puts at..??.$3.05
Net Proceeds:??????????????????.....$2.95
Profit: $2.95 - $2.65 = $0.30
(38 X 100 X $0.30) = $1,140 or 1.14% profit for the notional $100,000 portfolio.
