How Are You Hedging Against The Euro/Greek Crisis?

[Gary A]

I consider land in Thailand to be the best investment. Your wife can grow enough to feed you. You say that a farang cannot own land? Your wife can throw you out anytime? That is indeed true so you have to decide whether to trust your wife or the bank. I don't trust Wall Street, lawyers or banks so my gamble in on my wife. At least if things go bad she will be ahead and not some fat cat big wig corporate thief.

Have you considered that your wife might be considered sub-prime and not AAA some day?

and have you considered that not everybody has a Thai wife?

That's true but a mia noi would serve the same purpose.

[Naam]

I consider land in Thailand to be the best investment. Your wife can grow enough to feed you. You say that a farang cannot own land? Your wife can throw you out anytime? That is indeed true so you have to decide whether to trust your wife or the bank. I don't trust Wall Street, lawyers or banks so my gamble in on my wife. At least if things go bad she will be ahead and not some fat cat big wig corporate thief.

Have you considered that your wife might be considered sub-prime and not AAA some day?

and have you considered that not everybody has a Thai wife?

That's true but a mia noi would serve the same purpose.

only if the non-Thai wife allows it. mine doesn't

[manarak]

mo

netary easing from the fed is of course bad for the USD - looks like EUR and USD are racing down, while the Yuan watches, worried that it can't keep up.

But somewhere I read that China needs huge inflation to prevent a revolution...

Can you explain that as sitting here (in China) I would have said the opposite........or is there some irony i have missed?

no irony... apparently China's rich are holding huge masses of cash, while the population in short on cash. So massive inflation through salary raises would solve the problem.

[watcharacters]

most people in the "Know" are liquidating everything; there are some mind blowing events coming along and electronic trading or property will be the last thing on peoples minds if it will even be possible (trading that is)

Just look over the past 3 months how many seriously wealthy people have sold their houses.. not to buy another..the sheep need to wake up & realize we are going thro a serious time that will change the World totally, i am not talking about prophesy.

All the Games in Europe/US and middle East are just diversions the real serious stuff is happening in plain sight, most people are so chemically dumbed down their brains are just about working or they just aint bothered

You should take a moment to talk with Frank.

[Naam]

most people in the "Know" are liquidating everything; there are some mind blowing events coming along and electronic trading or property will be the last thing on peoples minds if it will even be possible (trading that is)

Just look over the past 3 months how many seriously wealthy people have sold their houses.. not to buy another..the sheep need to wake up & realize we are going thro a serious time that will change the World totally, i am not talking about prophesy.

All the Games in Europe/US and middle East are just diversions the real serious stuff is happening in plain sight, most people are so chemically dumbed down their brains are just about working or they just aint bothered

You should take a moment to talk with Frank.

you mean Frank with that comfortable couch where one can lie down, relax and talk?

[ExpatJ]

Anyone notice the bizarre reporting and lobbying regarding the European Financial Stability Facility being allowed to buy bonds of Italy , Spain etc ? Their bond yields are pushing them into a bail out situation so the French/Italian/ Spanish politicians all began telling reporters last week that the EFST would be used to buy bonds implying it was a done deal. Even a rep from the board of the ECB cam out today and said the same thing (note he was the FRENCH rep on the ECB , obviously getting his orders from Paris). Meantime Merkel just announced that the whole discussion of EFSF buying bonds is theoretical and will not happen. The French must be mad that they are basically impotent to Germany in this whole crisis (as a Brit , i love it:)

[yoshiwara]

The French must be mad that they are basically impotent to Germany in this whole crisis (as a Brit , i love it:)

Wouldn't want just one impotent in the room.

[fletchsmile]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

For next June's expiry, I've ended up with a core position built around a strip off put options bought at prices from 820 downwards, protecting my downside risk a little. Given the SET is around 800 these are now in the money, so I locked in some of the gains by buying call options around 800 upwards (today), when the market was around 790's. So from here on whatever happens, I'll have some downside protection if things get worse, and if they stay the same or get better the calls kick in.

Not dissimilar to yourself in some ways. The main diff tho' is I started selling far out out of the money calls (860-900), then selling out of the money puts (730-670) and used profits on closing out these at better prices combined with the premiums generated to fund the positions I have now, much closer to the money.

In summary, given the pace of the Thai market, you could do similar with SET50 options as you've done with TNA, but feel a bit more comfortable writing/ selling options further out to fund your positions. Sure you can do this on US index options too, but the point being pace is faster for the US market, pricing is keener, and you're up against more professionals, so selling/writing options there is less comfortable than Thailand in my view.

Edited June 22, 2012 by fletchsmile

[Naam]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

<snip>

where's the beef, i mean the "hedge against the euro-greek crisis"?

[lannarebirth]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

<snip>

where's the beef, i mean the "hedge against the euro-greek crisis"?

Making more money is always the best hedge.

[fletchsmile]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

<snip>

where's the beef, i mean the "hedge against the euro-greek crisis"?

I think you'll have noticed Dr.Naam that many of the asset classes, in particularly the equity markets are all being driven by the same global macro-economic (and political factors) at the moment. The SET is moving more due to factors external to Thailand than it is the internal factors. Take a look for example at today's "Morning Note" from Phillips: "US, Fed, China, European debt crisis...etc.". The whole of the pre-amble doesn't mention Thailand factors once.

https://datacenter.p...th/pdf/come.pdf

Bad news on European and US markets the night before, highly correlates with how the Thailand markets start the next day. The TFEX option market starts trading before the SET index starts moving + You've also got other Asian markets (I like Australia and Singapore) that open before as well

Edited June 22, 2012 by fletchsmile

[MrRealDeal]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

For next June's expiry, I've ended up with a core position built around a strip off put options bought at prices from 820 downwards, protecting my downside risk a little. Given the SET is around 800 these are now in the money, so I locked in some of the gains by buying call options around 800 upwards (today), when the market was around 790's. So from here on whatever happens, I'll have some downside protection if things get worse, and if they stay the same or get better the calls kick in.

Not dissimilar to yourself in some ways. The main diff tho' is I started selling far out out of the money calls (860-900), then selling out of the money puts (730-670) and used profits on closing out these at better prices combined with the premiums generated to fund the positions I have now, much closer to the money.

In summary, given the pace of the Thai market, you could do similar with SET50 options as you've done with TNA, but feel a bit more comfortable writing/ selling options further out to fund your positions. Sure you can do this on US index options too, but the point being pace is faster for the US market, pricing is keener, and you're up against more professionals, so selling/writing options there is less comfortable than Thailand in my view.

I don't mean to be rude but you wasted a lot of time with that post .......... Options are illegal in Thailand and what you mentioned is impossible

Options pricing is based on a Mathmatical formula that is used everywhere that uses options so I don't feel any more or less comfortable using them in one place over another.

If you mean to say "Futures" as opposed to options , they do allow and have a Futures market.

Edited June 22, 2012 by MrRealDeal

[MrRealDeal]

My trade was just that a short term trade based on the greek election and the fed meeting and really has nothing to do with an ongoing strategy to hedge any existing positions.

In my 25 years as a self employed trader I find selling options to be a loser compared to buying them , selling them limits your potential profits and buying them does not , most of the time people sell puts they don't short the stock to cover it , and when you sell calls on a regular basis eventually the profit you lose out on is more than the preimum you collected over time.

If you really think it's going down buying puts is way better .... if your right , than selling calls. If you think it's going up buying calls is way better than selling puts, especially in the long run , now as an experienced trader I use more complex strategys most of the time than that anyhow but the average person is really better off buying things that have unlimited profit potential than things that have limited potential for the same basic price.

If you really want a stream of income divedend stocks are better than selling options.

I do agree that going out a few months is generally a good idea , I have options on every month available out to Jan on a variety of things , however if you are buying them based on tomorrows news as in this case , the ones closest to tomorrow will move the most if you are correct , which is why I did it that way ..... I ended up selling the calls near the top and getting a little for my puts yesterday and breaking even in the end. Pretty lousy result but better than losing everything which is what would have happened if I had held it all until today.

I bought calls on TZA ... the inverse of TNA ... tripple short russel 2000 , for July and August they were cheap and generally some downslide happens in the summer so it's wait and see now I guess. With options is all about leverage not income really .... for every 170$ I am basicly owning 2000$ worth of TZA and getting the same return once the preimum runs out as it\if it gets high enough , but on the downside I can only lose 170 no matter how low the stock goes ..... thats why you are better off buying them than selling them in the long run. You can make a lot but lose very little , and if you are correct more than 50 percent of the time you make more or just as much while risking less.

The other thing I really like is that options traders don't need to worry about if they are to greedy or not greedy enough and should I sell now or later , the expiration date forces a close to the trades eventually and in my experience in a downturn or a bubble that is a huge advantage over what happens to everyone else. It's basicly a built in psycology protection stock owners don't get.

[Naam]

I think you'll have noticed Dr.Naam that many of the asset classes, in particularly the equity markets are all being driven by the same global macro-economic (and political factors) at the moment. The SET is moving more due to factors external to Thailand than it is the internal factors. Take a look for example at today's "Morning Note" from Phillips: "US, Fed, China, European debt crisis...etc.". The whole of the pre-amble doesn't mention Thailand factors once.

https://datacenter.p...th/pdf/come.pdf

Bad news on European and US markets the night before, highly correlates with how the Thailand markets start the next day. The TFEX option market starts trading before the SET index starts moving + You've also got other Asian markets (I like Australia and Singapore) that open before as well

what you pointed out is quite correct Fletch but i have strong doubts that your strategy can be used as a "lasting" hedge against negative fall-outs from Europe but has to be adjusted on a nearly day-to-day basis. perhaps i am skeptical because it wouldn't work at all with the few portfolios i am handling as they are not affected by short term stock market swings but mainly by risk acceptance/aversion and currency fluctuations.

but even the latter might affect different portfolios in completely different ways, i.e. the European based investor smiles when a strong SGDEUR boosts his performance whereas the Singapore based investor grinds his teeth. a similar situation (different effects on different portfolios) can be caused by various other factors but they are not exactly relevant because the question of this thread targets mainly the individual investor based in Thailand and his/her portfolio.

[manarak]

I have been a trader for years, licensed on four exchanges, including the German DTB (now called EUREX).

I also have traded on 25 other exchanges worldwide, mostly derivatives (futures, options) as well as OTC products such as forwards and swaps and some structures.

My clients were semi-pros and some were trading on behalf of wealthy people.

Quite some of them used to sell options, building up leveraged short positions.

Short options strategy is okayish as long as the profit made is very small, meaning someone with an account size of 100k would trade one or two contracts at a time (i.e. no leverage at all), then wait for time value to decrease or close early if price or implied volatility moved favorably, before building another very small position. a profit of 2 to 5% a month is realistic with this strategy.

Another way to make money with option selling is to improve the performance of an index portfolio by selling calls on the index positions which according to research have the least chances to perform above average. It is a good method to beat the index.

The problem with the above is when the markets do not behave as anticipated.

When you lose 2 or 3 months in a row, it takes huge discipline to not just take more risks in the hope of makig up the losses and instead settle again for 2% gain.

ALL CLIENTS WITHOUT EXCEPTION who sold options lost most of their money and had to close their accounts or were fired by the account holders.

Selling options is dangerous, even if you are very skilled and very disciplined.

This post is meant as a warning to other members, not to you, as you have 25 years experience!

Edited June 22, 2012 by manarak

[fletchsmile]

It's not a hedge so much but an investment\gamble ...... I bought puts and calls on the TNA friday, I expect the markets to move one way or the other enough to make a pretty good return. The TNA is the russel 2000 triple index and it moves pretty well on market swings.

Ever thought of trying Thailand's TFEX and using SET50 options?

It's quite a nice leisurely pace. A little thin on volumes sometimes. My perception is it's a little more forgiving than professional western derivatives exchanges, and more of a chance for the small retail investor, as you're not up against many large volume professional players and financial institutions with auto-trading systems. With this in mind it's more comfortable for also writing/selling options to generate the premium income.

For next June's expiry, I've ended up with a core position built around a strip off put options bought at prices from 820 downwards, protecting my downside risk a little. Given the SET is around 800 these are now in the money, so I locked in some of the gains by buying call options around 800 upwards (today), when the market was around 790's. So from here on whatever happens, I'll have some downside protection if things get worse, and if they stay the same or get better the calls kick in.

Not dissimilar to yourself in some ways. The main diff tho' is I started selling far out out of the money calls (860-900), then selling out of the money puts (730-670) and used profits on closing out these at better prices combined with the premiums generated to fund the positions I have now, much closer to the money.

In summary, given the pace of the Thai market, you could do similar with SET50 options as you've done with TNA, but feel a bit more comfortable writing/ selling options further out to fund your positions. Sure you can do this on US index options too, but the point being pace is faster for the US market, pricing is keener, and you're up against more professionals, so selling/writing options there is less comfortable than Thailand in my view.

I don't mean to be rude but you wasted a lot of time with that post .......... Options are illegal in Thailand and what you mentioned is impossible

Options pricing is based on a Mathmatical formula that is used everywhere that uses options so I don't feel any more or less comfortable using them in one place over another.

If you mean to say "Futures" as opposed to options , they do allow and have a Futures market.

I'm not sure where you got that information from, but it's wrong. I think you have been misinformed. Come to think of it I think I've seen you post that before.

I trade SET50 options here in Thailand and they are perfectly legal. They are exchange traded options and traded on TFEX (Thailand Futures Exchange). Take a look at the following links.

http://www.tfex.co.th/en/products/set50options-spec.html

To calculate theoretical prices or fair values of options, people do use mathematical models as you say, with various assumptions like binomial or normal distributions, combined with various inputs, delta, gamma, theta, vega etc. However, the prices you actually obtain are driven by supply and demand in addition. In Thailand you will be able to access the "OneClick" system via log-in to your broker. This has a wealth of data including showing the theoretical prices on each option, as well as bid-offer prices, last traded price, deltas, gammas, thetas, vegas, so a lot of the maths is done for you. It is not uncommon to see both the bid and offer prices either higher or lower than the theoretical prices.

In recent times with the Greek crisis put options bid and offer prices for example have been trading at a higher prices than the theoretical price, with both bids and offers on the calls lower than the theoretical price. For someone prepared to take the risk therefore, you can easily sell put options at higher than the theoretical model prices. This is something I've been doing, and then as prices move back to more normal rates, you lock in profits. Similarly on the call side. I've been able to buy calls below theoretical model values as no-one wanted to buy. Result a nice profitable position.

In contrast, US markets and TNA options are much more liquid, so the prices are usually closer to theoretical price. That the market is "less perfect" in Thailand therefore offers opportunities (and drawbacks) that are not necessarily there in other options markets.

Hope that clarifies. Not just for yourself, but also for people that have read your post and perhaps mistakenly also think that options are illegal and impossible in Thailand. BTW Open a Bangkok Post on Monday and under the business section for the Stock Exchanges there's usually a few small paras on TFEX mainly on futures but they also give SET50 option volumes.

[fletchsmile]

Mr.Real Deal

Below is the extract from the TFEX website. It could be that your info is simply outdated, as options trading on the Thai Futures exchange has been going nearly 5 years.

http://www.tfex.co.th/en/products/set50options-spec.html

"SET50 Index Options is a contract that gives the buyer the right, but not the obligation, to buy or sell SET50 Index at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties. The advantage of options is that you aren't limited to making a profit only when the market goes up. Because of the versatility of options, you can also make money when the market goes down or even sideways. SET50 Index Options is the second product on TFEX and was launched on October 29th, 2007"

[fletchsmile]

I think you'll have noticed Dr.Naam that many of the asset classes, in particularly the equity markets are all being driven by the same global macro-economic (and political factors) at the moment. The SET is moving more due to factors external to Thailand than it is the internal factors. Take a look for example at today's "Morning Note" from Phillips: "US, Fed, China, European debt crisis...etc.". The whole of the pre-amble doesn't mention Thailand factors once.

https://datacenter.p...th/pdf/come.pdf

Bad news on European and US markets the night before, highly correlates with how the Thailand markets start the next day. The TFEX option market starts trading before the SET index starts moving + You've also got other Asian markets (I like Australia and Singapore) that open before as well

what you pointed out is quite correct Fletch but i have strong doubts that your strategy can be used as a "lasting" hedge against negative fall-outs from Europe but has to be adjusted on a nearly day-to-day basis. perhaps i am skeptical because it wouldn't work at all with the few portfolios i am handling as they are not affected by short term stock market swings but mainly by risk acceptance/aversion and currency fluctuations.

but even the latter might affect different portfolios in completely different ways, i.e. the European based investor smiles when a strong SGDEUR boosts his performance whereas the Singapore based investor grinds his teeth. a similar situation (different effects on different portfolios) can be caused by various other factors but they are not exactly relevant because the question of this thread targets mainly the individual investor based in Thailand and his/her portfolio.

Yes, as you say Naam, we have quite different portfolios and underlyings, so the hedges are different.

I have large long equity exposures, and also large Thai equity exposures. Both have seen drops in values in the last few weeks because of the Greek and Euro crisis, even though my direct European equity exposure is only around 5%, they have all fallen. Hence buying put options and writing call options on (Thai) equities is a hedge for me.

As you say given your underlying exposures are mainly bonds, credit risk, interest rate risk and currency risk, equity options aren't the solution for you

[fletchsmile]

My trade was just that a short term trade based on the greek election and the fed meeting and really has nothing to do with an ongoing strategy to hedge any existing positions.

In my 25 years as a self employed trader I find selling options to be a loser compared to buying them , selling them limits your potential profits and buying them does not , most of the time people sell puts they don't short the stock to cover it , and when you sell calls on a regular basis eventually the profit you lose out on is more than the preimum you collected over time.

If you really think it's going down buying puts is way better .... if your right , than selling calls. If you think it's going up buying calls is way better than selling puts, especially in the long run , now as an experienced trader I use more complex strategys most of the time than that anyhow but the average person is really better off buying things that have unlimited profit potential than things that have limited potential for the same basic price.

That's true to an extent. However, you have to think what your objectives are and think about risk-adjusted returns in conjunction with your objectives, and not just absolute returns. I notice you had a similar disagreement with Lanna. The essence of which you were looking only in binary terms at whether someone won or lost/ made a profit or loss, whereas he was looking more at improving on an objective. You overlooked the point that while someone still made a loss, they were better off than if they simply aimed for their original objectives in isolation.

As an example, on long Thai equity exposures (mainly mutual funds) my best year was in 2003, and was up just over 100%. My worst year was down over 30% in 2008. The net combined of those 2 years in isolation being up over 40%. At those points in time, as I was working my pursuit was absolute return and I was less worried about the risk.

Today, I would much rather an absolute return of 35% (than 40%) for 2 such years if I could alter the risk profile and hedge so that the returns were say 50% up in a similar 2003 and 10% down in a similar 2008, or say up 25% in the best with no loss in the bad year.

Writing call options is a nice strategy that helps to work towards that. Particularly where everyone wants to buy and few want to sell as you can charge higher premiums than the theoretical models/ fair values imply, given the supply and demand factors, and in a market like Thailand where pricing is less perfect.

As you say, yes buying puts may also help. However, what you often find on SET50 Thai options is that in times like these in the Greek/ Euro debt crisis, few people want to sell put options, so you have to pay more than fair value to get them, given supply and demand.

So you have to consider playing the cards you're dealt.

The other thing I really like is that options traders don't need to worry about if they are to greedy or not greedy enough and should I sell now or later , the expiration date forces a close to the trades eventually and in my experience in a downturn or a bubble that is a huge advantage over what happens to everyone else. It's basicly a built in psycology protection stock owners don't get.

Yes I like that too. Nice to wipe the slate clean and move on. Then again there can be the temptation to role over your positions, as well as say funding near term options with later dated options

Edited June 23, 2012 by fletchsmile

[how241]

It is the uncertainty that unsettles the markets. What we certainly have learned is that gold is no place of safety and liable to volatility with the rest of it. In fact is going down with the euro. So what to do? In the short term, dollars is the place of safety. If the OP has opened accounts in HK and Singapore he could do worse than park cash in HKD. If the $/SGD rate is worth looking at for a longer term park in SGD. Property in both places has proved to be price resilient and generate income on rental.

I disagree on the gold- although it has been falling and i was getting edgy of my gold holdings, i think the solution to the greek crisis will be QE in the US and Europe on a massive scale..i note also that this morning a number of blue chip investment houses incl. goldman sachs still see gold at 2000$ + in early 2013.

You may disagree, but until you get that hoped-for QE, you are in a place of volatility, not of safety.

Second, if you watch CNBC or Bloomberg you will have noted that even blue-chip investment houses disagree with each other.

Everyday they sing a different song. It's all a gamble. Good luck to all.

[Naam]

interesting, the USD is in free fall vs. EUR, had lost all the ground it made yesterday.

What happened?

short covering happened, which -after Greek election results- was to be expected as sure as the "amen" after a prayer. now we are back to square one. the EUR has lost all ground it made in four trading days.

[MrRealDeal]

Well to answer the question about my misinformation , it was from the head of the Thai version of the IRS , about 10 years ago , he might have been wrong even then , back then he was not as high up , but yeah I \ he was wrong about that ..... Was he wrong then or is option trading less than 10 years old ? .... Back then he said it was considered gambling which is why he said it was not allowed

[MrRealDeal]

My trade was just that a short term trade based on the greek election and the fed meeting and really has nothing to do with an ongoing strategy to hedge any existing positions.

In my 25 years as a self employed trader I find selling options to be a loser compared to buying them , selling them limits your potential profits and buying them does not , most of the time people sell puts they don't short the stock to cover it , and when you sell calls on a regular basis eventually the profit you lose out on is more than the preimum you collected over time.

If you really think it's going down buying puts is way better .... if your right , than selling calls. If you think it's going up buying calls is way better than selling puts, especially in the long run , now as an experienced trader I use more complex strategys most of the time than that anyhow but the average person is really better off buying things that have unlimited profit potential than things that have limited potential for the same basic price.

That's true to an extent. However, you have to think what your objectives are and think about risk-adjusted returns in conjunction with your objectives, and not just absolute returns. I notice you had a similar disagreement with Lanna. The essence of which you were looking only in binary terms at whether someone won or lost/ made a profit or loss, whereas he was looking more at improving on an objective. You overlooked the point that while someone still made a loss, they were better off than if they simply aimed for their original objectives in isolation.

As an example, on long Thai equity exposures (mainly mutual funds) my best year was in 2003, and was up just over 100%. My worst year was down over 30% in 2008. The net combined of those 2 years in isolation being up over 40%. At those points in time, as I was working my pursuit was absolute return and I was less worried about the risk.

Today, I would much rather an absolute return of 35% (than 40%) for 2 such years if I could alter the risk profile and hedge so that the returns were say 50% up in a similar 2003 and 10% down in a similar 2008, or say up 25% in the best with no loss in the bad year.

Writing call options is a nice strategy that helps to work towards that. Particularly where everyone wants to buy and few want to sell as you can charge higher premiums than the theoretical models/ fair values imply, given the supply and demand factors, and in a market like Thailand where pricing is less perfect.

As you say, yes buying puts may also help. However, what you often find on SET50 Thai options is that in times like these in the Greek/ Euro debt crisis, few people want to sell put options, so you have to pay more than fair value to get them, given supply and demand.

So you have to consider playing the cards you're dealt.

The other thing I really like is that options traders don't need to worry about if they are to greedy or not greedy enough and should I sell now or later , the expiration date forces a close to the trades eventually and in my experience in a downturn or a bubble that is a huge advantage over what happens to everyone else. It's basicly a built in psycology protection stock owners don't get.

Yes I like that too. Nice to wipe the slate clean and move on. Then again there can be the temptation to role over your positions, as well as say funding near term options with later dated options

I didn't really overlook it .... I was arguing with his incorrect position that it was "risk free"

[manarak]

Went long against the EUR with USD and AUD, I'm already ahead by about 0.4% which is not bad.

The EUR summit can have 3 outcomes:

- no eurobonds: most likely. moderately bad for the EUR, no solution to soaring boorowing costs for the PIIGS

- eurobonds without "controls": very bad for the EUR and very unlikely, since Merkel said she would not see that in her lifetime

- eurobonds with "controls", i.e. european institutions control a country's currency, money supply and budget. would be very good for the EUR, but that result is very very unlikely as a political achievement, but also impossible in terms of immediate relief.

So... nothing good can come out of this summit, they will just be kicking the can and borrowing costs of the PIIGS will continue to soar.

Another thought: the current turmoil is not too bad for Germany, since the country is among the worldwide top exporters and a lower EUR helps selling German products, while the country can spend monkey-EUR within the EU to supply itself with basic goods.

So I don't expect Germany to help too much at this moment, and Germany is the only country in the EU that has serious money.

Edited June 27, 2012 by manarak

[manarak]

interesting:

http://www.reuters.com/article/2012/06/28/us-eurozone-idUSBRE85O0CS20120628

Merkel, stay firm!