Come again? Obviously he can go long USDGBP = the debit on the shares, but he's attempting to limit the FX exposure to those "stops".
whatever, that's why I never do anything without asking first, I think he just doesn't know how simple it is to put on a spot forex trade, maybe his broker doesn't offer it. It doesn't have to be dollar for dollar, he can customize it with size to match any strike he wants to with no time constraints. But I'm outta here, I don't want to get into it with you, you know more about it than I do and I'm already in over my head. Just throwin my 2 cents around today since I have nothing better to do.
As I understand, the FXB also represents the GBP/USD, so if I want to be protected from the GBP's depreciation I think I should buy (and not sell) OTM put and sell (and not buy) OTM call on FXB, isn't it? Btw, why are they called "cables"?
well, first of all "loonies" was already taken. otherwise most American men consider Englishmen to be effeminate. It is a well known fact that most effiminate men in America reside in San Francisco, the home of the cable car. But in this new age of social awareness, no one callls them cables anymore. If you are a trend trader, we usually just call them the "Goddamn British Pound."
I looked at the price and assumed it was gbpusd, but it wouldn't make sense to market a GBP fund as usdgbp. Anyway, sell a call, buy a put.
The problem is exactly in situations when the stock goes substantially down and the exchange rate goes substantially up, assuming that I am not speculating on the GBP/USD spot and I don't want to buy more USD. In such case I lose money on the stock and I lose money on the FX hedge. True, when having a direct exposure to the underlying (long GBP in cash) then of course selling futures or GBP is the best solution. But when having only an indirect exposure to the underlying (long GBP through stock ownership) then selling futures or GBP will just add an additional layer of risk to the stock risk, especially in situations as mentioned above (stock goes down and GBP goes up). Btw, if you, atticus or any reader have any idea regarding a hedge that will completely eliminate the FX risk when being long the underlying only indirectly (similarly to eliminating such risk when being long the underlying directly through cash) please let me know.