I feel unless there is some instrinsic reason that two markets have to be correlated its best not to assume that the correlation will hold, particularly if you are expecting to profit from it. If you are worried about too much risk, than I think its prudent to look at historical correlations. CHFUSD and Gold have been historically correlated because of their "store of value" and "safe" status. However, there have been extended times (over a year or more) where these two did not have a high correlation, sometimes it has been negative. If you think gold is in a bubble, is the suisse in one? If its not and the gold bubble begins to deflate will it drop? If you "know" gold is going to go down and want to add more risk or potential to the trade why not short more gold, buy some gold puts or something that you know will profit from that move, it seems a more efficient use of your capital. 5yr
There is a lot of wisdom in what you wrote, and I thank you very much. I think I will focus on gold. If gold were to retreat, how does the implied volty of the GLD puts behave? Does it fall like the volty of SPY calls does when spy rises? If GLD put volty were to rise, it would be good, but if it were to fall then it might create issues particularly with OTM puts. Thanks for sharing.
GLD is at 155. If I believe that GLD sellers would be within say 0.50 from current price, what would be a good strategy if I were to trade it?
I've read about this. Eastern Europeans took mortgages from Swiss banks for the low interest rates. They are hurting now as the CHF strengthens to record highs against Euro, zloties - as they have to pay mortgages back in CHF. It's only a matter of time before they begin to default on housing loans and there's a banking crisis in Switzerland. So I read. There's no way in hell I'd short the CHF yet though. Look at the EUR/CHF weekly :eek:
CHF loans not necessary issued by CHF banks. Ask japanese. It was a trap for young players. New caqpitalists unaware of the traps. Well prepared in advance by swiss. Same thing happened in AUDJPY in '80 i think as people took JPY loans. Thats why crisis now in AU not as severe as elsewhere. See australian movie "Bank", i think.
Well, more likely a banking crisis in Poland and Hungary, if you ask me. In general, this is just one problem. There's also a lot of structured notes issued by various EUR municipalities that makes them short EURCHF and short EURCHF vol. It's a sh1tshow, all around. It's too late for me, as I am in it. Still, the SNB isn't happy and there's been some vague talk of exchange controls (bullsh1t rumor, IMHO).
i think snb is happy. They making money big time. Average price 1.65 now 1.15. They try to hide the fact that it was done deliberately. Thats why some halfhearted intervention 140 to 150 area. I think decline will stop when debts are repaid, which is probably many years away or when enough individuals/companies/countries? goes bankrupt and flow to chf decreases. There is some talk of government helping these people but I fail to see how this can be done as CHF must be repaid. Except if government takes on the loan. Either way end is not near except if some kind of large default wipes out enough bad loans. Buying hedge - realising loss is probably too much to swallow for many at this point in game. Story in AU ended bad for these people. Loans increased 100% i think. Dont know details.. Maybe someone from AU that was arond at that time could shed some more light on that ?