Outrageous Predictions
Carry trade unwind brings USD/JPY to 100 and Japan’s next asset bubble
Charu Chanana
Chief Investment Strategist
Singapore Sales Trader
AUDUSD has gained 4.5% in the past 2 months and now trades at a new 1 year high on the back of a surge in commodity prices, fastest annual inflation in 7 months and central bank divergence.
Consider buying a Risk Reversal to receive premiums while expressing a bullish view on AUDUSD. Use the 2-week date of 20th Jan to cover the Australia Nov CPI on 7th Jan, US Dec NFP on 9th Jan and US Dec CPI on 13th Jan.
Risks
Watch out for AUDUSD breaking below 0.6698 as this strategy could lead to losses below that level. Both the max loss and max profit are unlimited – losses accumulate if AUDUSD falls below 0.6698 (from the put option) and profits start to grow if AUDUSD rises above 0.6780 (from the call option).
If AUDUSD closes below 0.6700 at expiry, you will be long AUDUSD at 0.6700. This works well if you were bullish AUDUSD to start with and wish to buy it anyway. If AUDUSD closes above 0.6780 at expiry, you will be long AUDUSD from 0.6780, participating in the potential move higher.
Consider selling a Risk Reversal to receive premiums while expressing a bearish view on AUDUSD. Use the 2-week date of 20th Jan to cover the Australia Nov CPI on 7th Jan, US Dec NFP on 9th Jan and US Dec CPI on 13th Jan.
Risks
Watch out for AUDUSD breaking above 0.6771 as this strategy could lead to losses above that level. Both the max loss and max profit are unlimited – losses accumulate if AUDUSD rises above 0.6771 (from the call option) and profits start to grow if AUDUSD falls below 0.6695 (from the put option).
If AUDUSD closes above 0.6771 at expiry, you will be short AUDUSD at 0.6771. This works well if you were bearish AUDUSD to start with and wish to sell it anyway. If AUDUSD closes below 0.6695 at expiry, you will be short AUDUSD from 0.6695, participating in the potential move lower.