you could not be more wrong on that. Sorry, but what does this actually mean "opportunistically hedged"? Sounds almost as intelligent as "I have a strategic long/short". Bottom line is if you risk 12 handles on an fx trade then you must be a horribly bad trader or retarded. Sorry I just do not find better words to describe that.
You are using strong words - which is fine but unfortunately you are not reading carefully. I said it was a calendar spread - so I bought premium and financed it by selling premium. It was a long term macro trade to be played out over 6-9 months - prices could have moved against you 5-10 big figures and we still wanted to be in the trade. And this was the sole reason why options were involved. I am sure you know the bid-offer on options - its not like spot. You can't buy sell every day. It was a long term macro position and we used spot to hedge only rarely like once a week or so. As it happened, the macro trade did not work out. But instead of losing X we lost 70% of X. Hope it clarifies.
so you lost 12 handles off the average price of your delta hedge? Sorry but yes, this is not clear to me what you are talking about because calendar spreads are generally traded to take exposure to volatility not delta, thus losing 12 handles on the delta sounds very odd to me.
Lol, now we? Wait, did you not just post multiple trades laddered up starting from 90? So your target is 65-70 on dollar yen? You gotta be kidding me. With what rational?
20-25 handle target was on the calendar spread trade not talking about this dollar yen trade. Hope that clarifies.
ummm....Allow me to explain. Taking a directional bet with spot would have exposed us to unacceptable levels of risk if the spot moved against us 5-10 figures. We wanted to not lose the macro position. The expected horizon of the trade at inception was 6-9 months. We were looking for a maximum of 20-25 figure move in our favor and an expected 10-15 figure move. With volatility in 2010, trade moving against you by 5-7 figures was a real possibility. Given these constraints, we decided to do the calendar spread with X2 at 12 big figures (to give us enough room) and X1 at spot to express our macro spot view using options. This was not your typical trade of a vol trader in a bank. Rather it was a trade that your typical hedge fund would do. Hopefully I explained it this time.
because, when you are hedging, you are betting that everything will probably keep going like it has always gone, but you know from past experience, there can be droughts, or wars, or alien invasions, so you are willing to give up the extreme profits if you are right, just to keep everything trading in the normal bands you are use to. That is why I have no position in JPY. Like the man said, it has gone parabolic. And the people that have opinions have a lot more money than me. I don't like trading things people are talking about. You can make make money if everything just keeps trading normally, but to do that, you need to hedge.
Ok, sorry my wrong. In any case with an unrealized loss on the book of 6 handles that implies you look to gain at least 12-15 handles (> 1:2 risk reward implied), why would you believe usdjpy to dip to about 82 levels? I just still miss the rational behind it. Re your calendar spreads, I have never witnessed a single trading desk not having gotten shut down for being so under water. No fx trader I have ever come across in my life has not been fired for a loss on the book north of 10 handles, no matter how small the position, no matter through which cash, options, or futures structure the delta came about. (this implies obviously that you remained delta unhedged which you indicated you did not hedge otherwise whats the point of talking about the market moving against your spread delta).