How Can I Buy A Hedge Contract?

[sfokevin]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

[tingtong]

the easiest hedge is to pay out now

[steveromagnino]

the easiest hedge is to pay out now

make the transfer now, indeed.

Alternatively, I know of several banks willing to sell a few shrubberies, and you can also talk about setting up a bank account in another currency now, then transfering from that later.

[Naam]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

any hedging done abroad vs. THB equals to a loss because of the difference onshore/offshore rate.

[sonicdragon]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

any hedging done abroad vs. THB equals to a loss because of the difference onshore/offshore rate.

The onshore/offshore element would only matter if he was selling forward, or he exercised an option offshore. He could buy an at-the-money put option on USD-THB to expire just after he wants to make the transfer. If it is in the money on the day he wants to transfer then he sells the option and makes the transfer and he has hedged the downside risk. The cost of the hedge is simply the cost of the option when he buys it.

[Naam]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

any hedging done abroad vs. THB equals to a loss because of the difference onshore/offshore rate.

The onshore/offshore element would only matter if he was selling forward, or he exercised an option offshore. He could buy an at-the-money put option on USD-THB to expire just after he wants to make the transfer. If it is in the money on the day he wants to transfer then he sells the option and makes the transfer and he has hedged the downside risk. The cost of the hedge is simply the cost of the option when he buys it.

unfortunately no options available for THB, only forwards based on offshore rate.

[sonicdragon]

Citibank Kong Kong will do OTC options on most asian currencies including THB. Not sure what the minimuim underlying is though. I would expect that spread betting firms like cantor and ig would do CFDs too, which could be another solution.

[topfield]

Thanks for that chaps. It is truly great to have currency dealing experts like Dr Naam and sonic dragon on our forum. Really appreciated.

[Temporaneo]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

Quite simply swift the money now and invest the baht in fixed deposit until september, so you can earn 4% interest.

Anyway my advice is always DO NOT INVEST IN THIS COUNTRY (unfortunately it seems you have to complete purchase to avoid losing what you paid already )

[sonicdragon]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

Quite simply swift the money now and invest the baht in fixed deposit until september, so you can earn 4% interest.

And what if the OP does not have the money now ? Maybe he is receiving it in September.

Anyway my advice is always DO NOT INVEST IN THIS COUNTRY (unfortunately it seems you have to complete purchase to avoid losing what you paid already )

I can only assume that you have had some bad experiences. In 10 years of investing here I have also had some bad experiences, but it's not difficult to learn from mistakes. Overall I have done quite nicely. There is always risk with any investment, it's a question of risk vs reward - that is what investment is all about. It seems to be disingenuous to give such jaded advice as "do not invest in this country".

Edited March 14, 2007 by sonicdragon

[topfield]

I have a final payment due on a condo purchase due in September of this year ($200,000USD) I would like to purchase some sort of hedge to lock in the present rate – Can someone advise how I as a US citizen could buy such a hedge contract to lock in the present rate…

Quite simply swift the money now and invest the baht in fixed deposit until september, so you can earn 4% interest.

And what if the OP does not have the money now ? Maybe he is receiving it in September.

Anyway my advice is always DO NOT INVEST IN THIS COUNTRY (unfortunately it seems you have to complete purchase to avoid losing what you paid already )

I can only assume that you have had some bad experiences. In 10 years of investing here I have also had some bad experiences, but it's not difficult to learn from mistakes. Overall I have done quite nicely. There is always risk with any investment, it's a question of risk vs reward - that is what investment is all about. It seems to be disingenuous to give such jaded advice as "do not invest in this country".

Yes but expertise like that of sonic dragon and Dr Naam helps

[Naam]

Citibank Kong Kong will do OTC options on most asian currencies including THB. Not sure what the minimuim underlying is though. I would expect that spread betting firms like cantor and ig would do CFDs too, which could be another solution.

i was always under the impression that CFDs are used exclusively for shares.

[sonicdragon]

Citibank Kong Kong will do OTC options on most asian currencies including THB. Not sure what the minimuim underlying is though. I would expect that spread betting firms like cantor and ig would do CFDs too, which could be another solution.

i was always under the impression that CFDs are used exclusively for shares.

No, you can get CFDs on almost anything that can be traded. I've done CFD's on wheat, cotton and silver. One paricular kind of CFD for currencies is called a non-deliverable forward (NDF), indicating that you don't actually have to buy or sell the underlying currency on the expiry date. For that reason it might be suitable for the OP.

[Naam]

One particular kind of CFD for currencies is called a non-deliverable forward (NDF), indicating that you don't actually have to buy or sell the underlying currency on the expiry date. For that reason it might be suitable for the OP.

sonicdragon,

i am well aware of NDFs but the crux is that banks refuse to buy single contracts (USD 50k each). most banks act only on 20 contracts although i forced my bank once to do "only" 10 contracts (BRL vs. USD). the same sad story nowadays with CNY. i would have liked to get into CNY via NDFs but my broadly diversified strategy does not allow a single position of one million dollars.

[sonicdragon]

One particular kind of CFD for currencies is called a non-deliverable forward (NDF), indicating that you don't actually have to buy or sell the underlying currency on the expiry date. For that reason it might be suitable for the OP.

sonicdragon,

i am well aware of NDFs but the crux is that banks refuse to buy single contracts (USD 50k each). most banks act only on 20 contracts although i forced my bank once to do "only" 10 contracts (BRL vs. USD). the same sad story nowadays with CNY. i would have liked to get into CNY via NDFs but my broadly diversified strategy does not allow a single position of one million dollars.

That's why I suggested the spread betters. Try cantor. I've done much smaller than 1mm underlying with them (nor recently though)

As for CNY, you can be long any amount you like through a regular bank account in HK. But there are daily conversion limits (20k per day). Not sure if non-residents can still open accounts easily or not - they were talking about tightening up on that. PM me if you want more info.