What were some reasons to be in the disastrous CHF trade during 2015?

Discussion in 'Forex' started by helpme_please, Oct 10, 2018.

  1. In 2015, the Swiss central bank decided to unpeg CHF to EUR and CHF made a huge gap move. It killed many traders. The damage was so extensive that even brokers were killed.

    What puzzles me is why would traders even get themselves into this trade in the first place? EURCHF did not fluctuate much because CHF was pegged to EUR. Why would anyone want to trade CHF and not EUR, given that EUR was very highly correlated with CHF due to the peg, EUR was more liquid, CHF was more far politically risky because of central bank decision?

    What did I miss out? Can more experienced forex traders here explain?
  2. luisHK


    Positive carry beeing long the eur.chf, than on top of that if u went long near 1.20 which the SNB insisted it would defend ( EUR.CHF wasn't pegged, the SNB put a floor @1.20), and u believed the SNB, the price could only stay flat or go up from there. Easy money. Oups...

    i was long eur.chf futures btw, bad day in the office...
    helpme_please likes this.
  3. Thank you for your insights. I understand now. It was the positive carry with the seemingly low risk that the price would not move much to take away the positive carry assuming SNB kept to its promise of defending the peg.

    I am glad it was only a bad day in the office. It means you had good risk management to protect against black swan events. I remembered some $800 million hedge fund got destroyed by this event.

    Would you mind sharing what risk management practice saved you from the CHF blackswan in 2015?
  4. luisHK


    Indeed that day ended up a disaster for lots of individuals and several companies.
    No complex risk management here, I wasn't a currency trader and the position was a bit smaller than the total account size.
    Notable is what made that day worse, after the eurchf started plummeting I tried to sell some as there was no bid on the futures to limit the losses but TWS wouldn't let me, kept bouncing the orders than froze completely, was the same mess after restarting the platform. Stock markets were crashing at the same time (not the swiss market though) and I started being afraid of getting margin issues if the eur kept crashing along stocks. As I couldn't touch the currency pair I sold several european stocks near the low of the day before the system let me trade CHF directly.
    Not my smartest trading decision ever... Miss a bit that time though, as 2015 was very volatile but ended up as a good year. This year is quite the contrary without being able to point at particularly dumb trades ( staying mostly away from growth stocks in the US being probably the most foolish).
    Last edited: Oct 10, 2018
  5. You have HK in your nickname. You're from Hong Kong? I remembered in 2015, Hong Kong stock market had a powerful rally from Apr to Jun. Those who were on the rally made loads of money. I guess that HK rally helped you recover losses from the terrible CHF and European stock trades.

    This year is a terrible year for me. Terrible year for Hong Kong stock market too. Even more terrible year for China stocks.
  6. luisHK


    Actually 2015 as a whole wasn't great for HK stocks (chart says HSI was down on the year), and the day the chinese central bank devalued the cny around 2% was another terrible day in the office.
    Yet sure, this year's HK and CN stocks' performances have to do with my poor returns so far, but those are mostly buy and hold positions.

    Good luck with your investments, fortunes tend to switch, although when it comes to emerging markets they can crash very hard.
  7. Handle123


    For very long term commodities, I had been short and still short Swiss Franc since 2011, it not a market I can easily do options as they are thin, so seldom do more than couple units in Forex and options in CME, but any kind of deep retracement, try to add but risk management comes before profits. I watched as it took out highs of 2014, my automation stops putting in signals trading when volatility exceeds back testing limits, and like any market that is "hot", movement is not done in couple pips or ticks, ended up waiting a few days and just added one unit, then another week after.

    I think where many traders don't do is put risk ahead of profits and do more for controlling risk, but in case of 2015, one day was no control, but I have seen and experienced days or nights such as this before, bar charts make similar movements whether 15 second or monthly bar charts.