Risk Reversal Trading + Currency Hedge

Discussion in 'Options' started by tradingjournals, Jun 20, 2010.

  1. Is anyone here doing it? Idea is to position in a risk reversal on equities (for instance on down side, buy put and sell call at different strikes) and to hedge with currencies. The reason for currencies as hedge is that they move but yet not too volatile while one is watching. Also cost of trading them is lower (in spread and commission), and they offer leverage.

    Any comments, experiences, and if others are doing it. Also mention others who might be using it.

    Also which pairs to use, and at what ratio with respect to market ETFs (SPY/QQQQ/IWM) or futures.
  2. Personally, I'd view these sorts of trades as a recipe for disaster... Too many moving parts, some of which are proper "unknown unknowns" (may Rumsfeld forgive me).