Trading Vanilla Forex options

Discussion in 'Forex' started by Eric1977, Jun 21, 2007.

  1. Eric1977


    I've recently started trading vanilla forex options, and I find that the large spreads (10 pips), make it extrememly difficult to trade various spreads. The only strategy I use is trading strangles (selling OTM Call and Put, same expiration), but if the underlying moves towards my shorts strike, it's very difficult to get out without a huge loss. What are some other stratgies for trading Vanilla Forex option spreads? I have a lot of experience on other options, but am new to FOREX and would appreciate any advise.

  2. Trading with Saxo?
  3. Eric1977


    No, I'm trading with Ikon GM. Saxo has 8 pip spreads on vanilla options, but they don't allow minnies (anything less than 100,000)
  4. 8 pips for EUR. I don't believe they're 8 beyond eurusd and usdjpy. Who are you clearing with IKON? Are you happy with the platform? I hear they shade/lean on client indications.
  5. Eric1977


    I'm not sure about the clearing, I thought it was IKON GM. I was referred to them by based in Houston (CFOS/FX). They told me they use Saxo and Ikon GM, but Saxo doesn't allow opening an account with anything less than 10K or perhaps 5K and they charge per ticket.

    The platform is pretty good, in terms of getting quotes, seeing the greeks, putting in orders, etc.

    BUT there seems to be a miscommunication. When I enter spreads, more specificially, strangles, I'm getting hit with 20 pips (10 on both sides). I was told my CFOS/FX this is because I'm going too far out of the money, and it's better to enter the order in the early morning eastern US time when all of the markets are open. I've called about 2 orders so far, and both times, the person on the phone who puts in my orders (always has a very heavy foreign accent by the way), tells me that whan I see on the screen is what I get, and I don't save anything when I call it in as a spread. Anther words, it makes no difference if I leg in or not. This goes against what the CFOS/FX desk tells me, that I can sometimes get an 16 - 18 pip spread if I enter both orders at the same time, depending on liquidity at the time. Perhpas I'm still too far out of the money or calling at a bad time. The person on the phone also tells me that he's in the US when I ask where they are, and I'm sure they're not, so I don't appreciate not being told the truth.

    It could be that I'm still new to the game and I don't understand all of the technical terms.
  6. Have you looked into the new FX options traded on the PHLX? Might be better spreads..
  7. Eric -- fixed pip option spreads favor atm options and >duration. Try to limit yourself to small, atm straddles. You're losing edge relative to the atm combo.
  8. ISE also has four currency pairs

    ADV about 3000 contracts and open interest about 100,000
  9. Chood


    riskarb is the ET member whose view you need if you're looking to get into forex options. I would guess -- purely a guess because I have not traded options of any kind for over 20 years --that the difficulty of trading OTC options in forex is at least one order greater than trading forex cash or futures. I won't even try to "price" the chances of success trading OTC options with forex retailers whose reputations are suspect at best.
  10. I'm on this thread. You can't sell strangles in a fixed-pip market. You're decimated on premium/edge. Japanese corporates are selling vol in record numbers. They've recently discovered vol can be sold as well as bought, and vols reflect it. Vols are hitting fresh 5-year lows on a daily basis.

    IOW, selling strangles with IKON or Saxo is contraindicated here. Sell straddles with delta exposure if you must sell naked gamma.
    #10     Jun 21, 2007