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keeprenting

Currency Options

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I should add - I want to buy a cash settled option, to be settled in sterling.

I would recommend Interactive Brokers, they are discount brokers and do currency options among other things. I don't know if they are the best for those kind of things though.

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Depends on the size of the option notional you would want.

Someone like CMC could easily do this for you but minimum size would be probably £100k to £250k

For smaller stuff, cash settled in sterling, then I think spread betting accounts like IG Index offer a decent selection of strikes/expiries.

Fx options vols are still pretty elevated right now so I'd think carefully about whether an option really is better than a spot position with a stop.

EUR/GBP rose quite a bit today mainly on the back of a UK clearer buying a couple of yards for a real-money account. GBP/USD traded heavy aswell all day (though to be fair it had gone up too much the prior day).

Edited by david m

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Depends on the size of the option notional you would want.

Someone like CMC could easily do this for you but minimum size would be probably £100k to £250k

For smaller stuff, cash settled in sterling, then I think spread betting accounts like IG Index offer a decent selection of strikes/expiries.

Fx options vols are still pretty elevated right now so I'd think carefully about whether an option really is better than a spot position with a stop.

EUR/GBP rose quite a bit today mainly on the back of a UK clearer buying a couple of yards for a real-money account. GBP/USD traded heavy aswell all day (though to be fair it had gone up too much the prior day).

Google Soc Gen warrants

They have puts and calls on all major indices, currencies, some commodities and large companies

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Thanks for the replies. I will have a look at these websites. For information:

- I have about £60,000 saved up as a deposit for a house.

- I expect UK house prices to fall and sterling to fall with them. I expect the sterling: euro exchange rate to move to somewhere near parity once the public sector cuts and the HPC get going.

- So I want to take out an option to purchase (say) 75,000 euros. The strike price should be set at today's exchange rate. I should be able to exercise at any point from mid-2011 to about mid-2012. The rationale for this is that IMO this is the period when the cuts will really start to take effect and the HPC will have been going for several months.

- Once sterling has fallen I intend to exercise and take a profit in sterling. I don't want the contract to be settled by delivery of euros because the money is to buy a house in the UK.

- I don't want to take out a forward contract because I don't really know what I'm doing and I am scared that it could go wrong. A load of PIIGS countries defaulting on their debt, the end of the euro, that sort of thing. Although an option will be more expensive, it will (a) protect me from c*cking it up, and (b ) give me some comfort that I'll be OK even if sterling does turn to sh*t.

Further questions:

- How much is this likely to cost me?

- Could I make it materially cheaper by having a shorter exercise period?

- How much of an additional premium will I pay for taking out an option as opposed to entering into a forward contract?

- How much more would it cost me to take out an option over 100,000 or 150,000 euros, rather than 75,000 euros?

Edited by keeprenting

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Thanks for the replies. I will have a look at these websites. For information:

- I have about £60,000 saved up as a deposit for a house.

- I expect UK house prices to fall and sterling to fall with them. I expect the sterling: euro exchange rate to move to somewhere near parity once the public sector cuts and the HPC get going.

- So I want to take out an option to purchase (say) 75,000 euros. The strike price should be set at today's exchange rate. I should be able to exercise at any point from mid-2011 to about mid-2012. The rationale for this is that IMO this is the period when the cuts will really start to take effect and the HPC will have been going for several months.

- Once sterling has fallen I intend to exercise and take a profit in sterling. I don't want the contract to be settled by delivery of euros because the money is to buy a house in the UK.

- I don't want to take out a forward contract because I don't really know what I'm doing and I am scared that it could go wrong. A load of PIIGS countries defaulting on their debt, the end of the euro, that sort of thing. Although an option will be more expensive, it will (a) protect me from c*cking it up, and (b ) give me some comfort that I'll be OK even if sterling does turn to sh*t.

Further questions:

- How much is this likely to cost me?

- Could I make it materially cheaper by having a shorter exercise period?

- How much of an additional premium will I pay for taking out an option as opposed to entering into a forward contract?

- How much more would it cost me to take out an option over 100,000 or 150,000 euros, rather than 75,000 euros?

http://en.wikipedia.org/wiki/Black%E2%80%93Scholes

http://en.wikipedia.org/wiki/Futures_contract

these should set you off. you can get the indicative volatility for a put or call on the soc gen warrants website. if i wanted to answer these questions i would put the formulas in a spreadsheet and have a crack.

or someone here might do it for you

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Thanks. I'll probably just email a few people on the websites people have listed to see what they think. If anyone else has any thoughts, let me know. There must be others holding sterling and feeling slightly worried...

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- So I want to take out an option to purchase (say) 75,000 euros. The strike price should be set at today's exchange rate. I should be able to exercise at any point from mid-2011 to about mid-2012. The rationale for this is that IMO this is the period when the cuts will really start to take effect and the HPC will have been going for several months.

I'm not sure an option will do the job based on your requirements. Options are not cheap, particularly with the amount of volatility we are experiencing at the mo. Also, the minimum contract size for options is in the region of £100,000 so you would be hedging on twice the size of your capital which would be doubly expensive. Finally, unlike simple diversification, if the strike price is not reached by the option expiration date you've lost the premium in its entirety.

I can check prices on Monday and let you know to give you a feel but I can tell you now it won't be cheap. My two pence is that you'd be better off opening a foreign currency money market account and spread your savings accordingly.

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- So I want to take out an option to purchase (say) 75,000 euros. The strike price should be set at today's exchange rate. I should be able to exercise at any point from mid-2011 to about mid-2012. The rationale for this is that IMO this is the period when the cuts will really start to take effect and the HPC will have been going for several months.

How much would you be prepared to pay for such an option?

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I'm not sure an option will do the job based on your requirements. Options are not cheap, particularly with the amount of volatility we are experiencing at the mo. Also, the minimum contract size for options is in the region of £100,000 so you would be hedging on twice the size of your capital which would be doubly expensive. Finally, unlike simple diversification, if the strike price is not reached by the option expiration date you've lost the premium in its entirety.

I can check prices on Monday and let you know to give you a feel but I can tell you now it won't be cheap. My two pence is that you'd be better off opening a foreign currency money market account and spread your savings accordingly.

Thanks. If it won't take too long, please do have a quick look. I'll have a look at money market accounts instead, though.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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