Buffett's $18 Bln Ccy Bet

Discussion in 'Trading' started by OneHipCat, May 19, 2004.

  1. Does anyone know what foreign currency he is shorting the USD against?

    Apparently, he's using forward contracts to make his bets. Can anyone explain to me how that works? Why not just go through the spot market?
  2. EBOAH


    I believe Buffett has bet on the Euro, Australian Dollar, New Zealand Dollar and other Higher Yielding Currencies!
  3. vkoenig


    i believe he announced what he announced to unload foreign currency and to get better prices
  4. Forwards and spot are pretty much the same thing except forwards are typically used for long term bets on commodities.
    (Currencies included), They are priced based on the yield curve for the particular currency's risk free rate of return.
    When you trade the spot market, you are typically trading a T+3 settlement. If you want to keep the position longer than three days, you can either roll over to a later settlement date by closing your position at T+3 and reopen one at T+5 for example.
    Or, if you have a longer term frame in mind, you can go through the forward curve and take a position at T+150 or roughly 5 months down the road.
    Forwards and futures are pretty similar but usually forwards are OTC products.
  5. Thanks swoop, that cleared things up for me.