Just to refresh, Sir Alan worried whether China had gone too far too fast in late May. FXI is the best way to play it here (along with another Chinese ETF whose name escapes me right now). It dipped from around 115 to 110, shot up to 140 and then back to 110 again in August. And then has had a simply unreal rally in the last month to 175 earlier.
Of course Sir Alan is "right", it was never an insightful point. FXI will halve in a short time frame at some juncture. But silly to guess when and where, it could be from 400 to 200 for all we know. Next week, lol.
It's tough option to trade, I dabble a little. Volatility is about 40, which is roughly average. But it's like a biotech in that you really can't go net short contracts in either direction for fear of getting run over by an overnight bulldozer. I generally put on backspread-ish positions where I sell a deeper options vs. buying larger numbers of a cheaper one. Which gives you a smidge of long gamma.
5 comments:
Easy Al is right! He is just 'early'! :)
yup, he'll be "right" someday.
would you mind throwing out some prices and ratios for illustration's sake? like how far out of the money you'd go, or does it even matter? thanks
it's such a bizarro product with big volatility and strikes only $1 apart. All i really have on now is long some ATM puts (174's and 175's) and short some OTM's (165 and 164) and long a little stock against it. I do have downside risk in that my put spread can only go up to 10ish. What I will eventually do is either sell the stock into further liftage or buy cheapo puts to lock it in.
thanks for that, Adam. this makes it a bit easir for me see what you are doing.
Are you playing in the front month, or going a little out in time?
Hypotetically speaking, if the strikes weren't a buck apart, let's say $5, how would you have put the trade on? better yet, why not ignore that the strikes are $1 apart and just trade it as if $5? Thanks again
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