Option valuation: Upper bounds and lower bounds – Part 1 ...

King Bond Market Long $TLT, Bear Oil Fossil Fools and thus almost every sector ETF, selling a put of 5G companies

From the $BLK DD guy that rolled into $XLF last month. I am currently long $SLV, $GLD, $GDX, and $GDXJ with call spreads, shares, and just pruned $AMZN and $AAPL gains but keeping $ARKF, $ARKQ, and $ARKK (ETFs with $TSLA as the largest holding.)
Today, Friday's CNBC "Options Action" has just dangled calls on the $TLT, the ETF that tracks the 20+ year *BOND PRICES move inverse to yields and the Fed would not mind rates to hit 0% to spark inflation.* I concur with CNBC who suggested buying August dated call spreads on $TLT.
My $XLE long dated puts have been melting up. I am short every sector ETF but $IBB and $XLV. Be careful as these options are not as liquid as the $QQQ or $SPY but I cannot help that sectors are moving down when oil is down.
The VIX is holding steady, steady high. I am not hedging with the $VIX when stay home stonks work- the $VIX is broken imao so use $GLD, $SLV, and $TLT because bond rates are going to 0% (meaning the price goes up.)
I also concur with CNBC that options are the best way to play a market by reducing risk like selling a put. There are risky options, and very safe options if you can own 100 shares (the company could be $DTEGY Deutsche Telekom AKA T-Mobile/Sprint and the bringer of 5G eventually, pick your poison.)
I suggest selling a put for some good companies with solid balance sheets, 5G capabilities, and anything auto in the green space to get 100 shares of companies (see the next paragraph.)
My suggestions for getting 100 shares at a cheaper price would be Ericsson (trading under $10,) Dell or VMWare (you pick the one that matches your risk,) NIO (trading below $10), $NOK at $4 is interesting, and for big rollers Amazon (if you have the $ to own 100 shares at $2,500 or $250,000 or less, I would but that is for wsb) That is, if Amazon retests $2,500. I suggest 100 shares of $SHLL for YOLO if this bores you as this is the best $SPAC (but there is probably other ones because management is all you have with blank check companies.)
AFTER you own 100 shares of $AAL or $TSM or Dell or whatever, you can dump the 100 shares anytime. I suggest you keep them and sell options and join the theta gang. Why not get paid for owning your 100 shares of $TSM [Taiwan Semiconductor, the company onshoring manufacturing to America] you got at $45? $TSM August 21 $45p is $.35. If you had 100 shares of $TSM today, selling a $60c gives you $140 just for holding the shares until August 21st.
Bullish on onshoring green jobs because Trump leaving office is the biggest buy after the news ever. (Buy on the rumor sell on the news but in reverse because solar employs more than fossil fools in TX pre COVIDcession.)
For examples of selling a put: $AAL Nov 20th $2 puts are $0.14 (You are agreeing to buy 100 shares of $AAL at $2/share before or on November 20th, if you are not asked to buy $AAL you keep your $0.14 collateral and the full $14 credit.)
A shorter dated long put $AAL Aug 21st put is $0.09 ($9.) Or you could buy the death puts on $AAL but JPow exists, hence zombie companies, like Hertz, so that is just blowing money. $AAL has the highest %age interest on their debt and the CLOs (their bond insurance) were the highest, I have to check again ($AAL is the worst, but not as bad as $HTZ, a worthless zombie stock.)
*BOND prices move inverse to yields so going from 0.5% to 0% makes the price go up* Zombie companies with balance sheet nightmares is what keeps bond prices upper bound at 0.8 but lower bound is 0%.
Worthless zombie stocks include banks, fossil fools, and then by default industrials, and I hate to say that I am only long $XLK and thinking of $IBB. Every day that oil is not above $35 or in the green or both is a day stonks tank. Every stonk will fall after earnings. Short individual stonks going into earnings, wait- all stonks have cancelled earnings. See why I think maximum protection by not going long the VIX but long gold, silver, even transition phase metals, copper, and BONDS.
$NEM, $GLDI, $SLVP, $HL, $SAND, $SA, $GLTR, $PALL, $SPPP, $SSRM, $BTG , $PPLT, $PLTM, $NUGT, $BAR, $FNV all up today [I also have $GLNCY, $SBSW, and $PLG.] Why own these when you can just long $GDX and $GDXJ?
I do think rates will remain positive, until they are not positive anymore, AKA Japan and Europe :). What BOND fund would you long or short and why, besides $TLT? If a 100 year bond comes out, the interest rate will be 0% anyways in the long run, but we are dead in the long run, so long live bonds until we decarbonize the economy, tax the rich, and pigs fly (not happening fast enough.) Ray Dalio and many others have been harping about this, and a broken clock is right twice a day, or a bear is right when we are in a bear market with a broken VIX.
The bond market is king compared to the stonk market in sheer $. And ForEx trades trillions a day and is important (on days the $DXY, the basket of the dollar versus the globe) goes up $GLD should ease and is a time to buy the dip, and on days the $DXY goes down $GLD will gap up during this "bear oil/hospitality/planes" market.) When the $DXY goes down, it takes more dollars to buy the gold/silvecoppematerials, and $GLD rises and is very liquid for options. Thinking August to add to my Dec 31st $160c. That is, unless we are going to allow millions to go into poverty, so then just buy guns and physical gold and we can trade scraps of silver.
Fossil fools, the slow pace of massive renewable energy projects, and both candidates tripping overthemselves to be more anti-China during global warming and upcoming food inflation spell the need risk reduction (if you plan on holding equities please buy puts to hedge.)
TL;DR $TLT August call spreads, $TLT is the 20 year bond ETF. Pick companies you want to own 100 shares of by selling a put while long $GLD and long $SLV print money so holding the 100 shares prints money joining theta gang.
submitted by daviddjg0033 to smallstreetbets [link] [comments]

My EUR/USD Thesis

Hey everyone, long time lurker here. I'm a Finance/MIS student with experience in equity/crypto markets, and now looking to be profitable in forex and to contribute to this community.
I have put together an argument for why the EUUSD will be headed lower for the rest of the year and perhaps into 2019. There are both technical and fundamental aspects that will be presented, with an imgur album attached with a 4H, 1D, and 1W chart. The daily chart is attached with the post. Let's get started!
Technicals:
  1. From a 40,000 ft. perspective, the weekly chart presents a price channel going back to 2008 that the pair has traded in. In early 2018, the uptrend of 2017 halted and then reversed from the upper bound of the channel, while at the same time breaking downwards out of a symmetrical triangle formation - a clear reversal formation.
  2. On the daily chart, we have the 50 day SMA crossing the 200 day SMA on June 6, the first time this has happened since the beginning of an uptrend in May 2017.
  3. There is a potential descending triangle forming, which is labeled on the daily chart. There have been two overhead rejections, and two bounces from the supply zone. On the first bounce labeled "1", there was a bullish engulfing candle that failed to generate a significant rally - then on "2", there was not nearly as much buying pressure present off the bounce, signaling a likely continuation of the downtrend once the triangle is broken.
Fundamentals:
  1. The Fed is further along than the ECB when it comes to raising rates. The U.S. economy continues to experience strong growth in almost all sectors which has led the Fed to steadily increase interest rates. On June 14th, the ECB announced rates would remain unchanged which led to a bearish reaction for the EUUSD.
  2. While the U.S. has been no stranger to political instability, the EU is increasingly being affected by eurosceptic forces. The Italian populist government recently gained power and is implementing anti-EU policies and has considered dropping the Euro/leaving the Eurozone. Angela Merkel could potentially be ousted as Chancellor and thus the de factor leader of the EU over migrant policies.
The trade, and where it could go wrong:
I will open multiple trades after a retest of the supply-turned-demand zone at 1.151, with take profit levels outlined by the gray zones and the black line representing the height of the descending triangle. Trade wars, a downturn in the US equity market, and the de-dollarization in the world financial system are the three big threats to this thesis. If you have advice, opposing views, or just want to tell me I'm wrong, please let me know. Thanks!
https://imgur.com/a/mfzvquG
https://preview.redd.it/8qgds8j600611.png?width=2192&format=png&auto=webp&s=d613143b9eabc13cd3a47477d125fec49b588174
submitted by jakecberry to Forex [link] [comments]

How Fed Funds Rate Works (and Why Forex Traders Should Care)

The aim of this post is to show how the current federal funds rate operation differs from its pre-crisis model and how it is important to Forex traders.

Before 2008

When things were simple (before 2008), the Federal Reserve set its target federal funds rate (FFR) as a single number and made sure that the effective federal funds rate (EFFR) is at the target level by performing open market operations (OMO). Those OMO normally included repurchase agreements (repo or RP) to temporarily increase the reserves supply in the federal funds market (FFM) (and thus reduce the demand and the EFFR) and reverse repurchase agreements (RRP) to temporarily decrease the supply of reserves and drive the EFFR up. It worked very well because the total size of bank reserves was rather small ($15 billion) in pre-crisis times.

Our times

Nowadays, when the Fed is holding $2.27 trillion in reserve balances (as of March 27, 2017), the old scheme would not fare so well. There is no scarcity of reserve balances at all. To create it, the Fed would need to sell a big share of its securities to shrink the total reserves to manageable size. But that would create some problems — it would drive down the prices of those securities and would launch a series of unpredictable market feedback loops. Instead, what the Fed is doing since 2008 is setting a target FFR as a range between two interest rates. For example, it is 0.75%-1.00% as of today while the EFFR, measured as volume-weighted median, was at 0.91% during the last 3 days.

Ceiling rate

The Fed makes sure that the FFM respects the target bounds by setting the interest on excess reserves (IOER) to the top boundary rate. When 95% of the reserve balances are the excess balances (balances exceeding the required level), the IOER rate paid by the Fed to the banks for holding these reserves serves as the ceiling for the rate corridor. It may sound counter-intuitive, because IOER would have been a floor level if only the FFM was composed only of the banks. However, it is not the case. The government-sponsored enterprises (GSE), such as Fannie Mae, Freddie Mac, and Federal Home Loan Banks, comprise the bulk of the FFM. GSEs do not earn IOER on reserve balances kept at the Fed. This creates an arbitrage opportunity for banks to borrow from GSEs and allocate the funds with the Fed to earn IOER. Consequently, the interest rate of GSE's loans to banks should be below IOER.

Floor rate

And how about the floor of the rate range (the 0.75% part of today's target range)? It is enforced by the Fed through the OMO called overnight repurchase agreement (ON RRP). With it, the Fed can drain some reserves from the system by borrowing cash from market participants, giving them securities as a collateral. Since not only banks can earn interest on their funds with ON RRP (GSEs can also do it), this sets the de facto lower boundary for the EFFR. Who would lend at a lower rate if they can choose to get at least this rate from the risk-less loan to the Fed? One important feature of the current system is that the EFFR does not cling to the upper side of the rate range (IOER) but hovers below it, falling down to near the ON RRP rate during the final day of the month. The reason for the former is that the banks pay higher FDIC insurance fees when they borrow more. And the reason for the latter is that the banks need to follow the Basel requirements, which limit their leverage, but are calculated based on the end-of-month balance sheet.

Efficiency

As a result, we can see the EFFR fluctuating between ON RRP and IOER — well within the boundaries of the Fed's target FFR. The short-term interest rates (represented by the 3-month Treasury bills) roughly follow the EFFR, which means that the interest rates get propagated beyond the FFM. Note the EFFR spiking down on each last day of the month:
EFFR inside target FFR range with 3-month Treasury Bill rate for comparison

Relation to Forex

So why should Forex traders care about this? Because effective federal funds rate and the Fed's ability to uphold it are even more important for the US dollar than the target rate set by the Federal Open Market Committee at its meetings. It is the higher EFFR that would stimulate banks buying more USD to park it either with the Fed or with the GSEs. It is the lower EFFR that would let banks to use the USD as a carry trade short side. Now you see that any significant news concerning GSE regulations, Basel III requirements, or FDIC insurance fee policies could have tremendous influence on the USD rate based on how such news could affect the EFFR. As a currency trader, you have to be up-to-date with the expectations of the FFM participants regarding those three components. I recommend the following resources to stay up-to-date with those topics:
Of course, you can also use some financial news outlet of your choice that would cover all these topics.
submitted by enivid to Forex [link] [comments]

Dual Thrust Trading strategy

Dual Thrust Trading strategy
Abstract
The Dual Thrust trading algorithm is a famous strategy developed by Michael Chalek. It has been commonly used in futures, forex and equity markets. The idea of Dual Thrust is similar to a typical breakout system, however dual thrust uses the historical price to construct update the look back period - theoretically making it more stable in any given period. www.fmz.com
In this tutorial we give an instruction details to the strategy and show how to implement this algorithm on FMZ. After pulling in the historical price of the chosen trading pairs, the range is calculated based on the close, high and low over the most recent N-days. A position is opened when the market moves a certain range from the opening price. We tested the strategy on individual trading pairs under two market states a trending market and range bound market. The results suggest this momentum trading system works better in trending market but will trigger some fake buy and sell signals in much more volatile market. Under the range bound market, we can adjust the parameters to get better return. As a comparison of individual trading pairs, we also implemented the strategy on BTC/USDT. The result suggested that the strategy beat the market.
Its logical prototype is one of the more common Day trading strategies. The opening range breakout strategy is based on today's opening price plus or minus a certain percentage of yesterday's amplitude to determine the upper and lower rails. When the price breaks through the upper track, it will buy long, and when it breaks the lower track, it will sell short.
The basic principle of this strategy www.fmz.com
  1. after the market closed today, calculate two values: the highest price - the closing price, and the closing price - the lowest price. Then take the one which is larger in these two values, multiply this value by 0.7. let’s call it value K. The result is called the trigger value.
  2. after the market opening tomorrow, record the opening price, then buy immediately when the price exceeds (opening price + trigger value), or sell short when the price is lower than (opening price - trigger value).
  3. This strategy has no clear stop loss. This system is a reverse system, that is, if there is a short position order holding at the price exceed the (open + trigger value), then it will send two buying order (one to close the wrong position, another one to open the new position for the right direction). For the same reason, if there is a long position order holding at the price lower the (opening-trigger value), then it will send two selling order.
Which by mathematical expiation is :
range=max(HH−LC,HC−LL)
The long signal is calculated by
cap=open+K1×Rangecap=open+K1×Range
. The short signal is calculated by
floor=open–K2×Rangefloor=open–K2×Range
where K1 and K2 are the parameters. When K1 is greater than K2, it is much easier to trigger the long signal and vice versa. For demonstration, here we choose K1 = K2 = 0.5. In live trading, we can still use historical data to optimize those parameters or adjust the parameters according to the market trend. K1 should be small than k2 if you are bullish on the market and k1 should be much bigger if you are bearish on the market.
www.fmz.com
This system is a reversal system, so if the investor holds a short position when the price breaks the cap line, the short margin should be liquidated first before opening a long position. If the investor holds a long position when the price breaks the floor line, the long margin should be liquidated first before opening a new short position.
Dual Thrust has made improvements in this opening range breakthrough strategy: www.fmz.com
  1. In the range setting, the four price points of the previous N days are introduced, so that the range in a certain period is relatively stable, and can be applied to the daytime trend tracking;
2, Dual Thrust for the buying long and selling short trigger conditions, consider the asymmetric amplitude, long and short reference Range can choose a different number of cycles, can also be determined by parameters K1 and K2. When K1K2, the short position is relatively easy to be triggered.
Therefore, when using this strategy, on the one hand, you can refer to the optimal parameters of historical data testing. On the other hand, you can start to adjust K1 and K2 in stages according to your own judgment of the post-trend or from other major cycle technical indicators.
This is a typical trading way of waiting for signals, entering the market, arbitrage, and leaving the market, but the effect is outstanding. www.fmz.com
www.fmz.com
submitted by FmzQuant to u/FmzQuant [link] [comments]

Upper Bound and Lower Bound Finding Zeros Using Synthetic ... Bollinger bands trading strategy forex: When should you use Bollinger Bands? Bollinger bands Trick 100%Profitable Bollinger Band Trading Strategiesbollinger bands explaineddouble bollinger band Naked Reversals: Trading Range-bound Markets Upper bound on forward settlement price  Finance ... Bollinger Bands and Trading Forex Markets How To Identify Trade Choppy Sideways Markets Forex Trading Strategies

Limiting limit order risks by specifying lower and upper bounds A trader can limit his or her risks by setting the optional lower and upper bounds fields in the Buy/Sell Limit Order window. An order will then be executed only (i) if the exchange rate to be applied is equal to or higher than the lower bound (if specified) and (ii) if the ... Upper Band = 18 period high Lower Band = 18 period low Middle Band = (18 period high + 18 period low) / 2. Through focusing on the market behaviour evident between a periodic high and low, Donchian Channels are able to quickly identify normal and abnormal price action. Further, the upper/lower bands may be viewed as support and resistance ... This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own ... Traders can make good profits from a range-bound forex market. In a range market, it is easy to spot the support and resistance levels to enter a position. BTC: $16,114.89 ETH: $457.03 XRP: $0.25 Market Cap: $465B BTC Dominance: 64.20%. BTC: $16,114.89 ETH: $457.03 XRP: $0.25 Market Cap: $465B BTC Dominance: 64.20%. Advertise Publish. Home; News. Forex Cryptocurrency Regulation Announcements ... These maximum limits will have to be discussed for European and American options separately. We first take up the upper and lower bounds of European calls. Upper bounds of European call values: Let’s assume that the call value of an option is 55 and the underlying stock is trading at 50 in the spot market. In such a scenario, anybody can ... The lower and upper bound ensures that by the time the order is actually received by Oanda and executed, since the market can move in any direction so quickly, that the price the order is filled at is within the bounds you set. For example, you want to buy EURUSD at 1.1380. You create an order at that price, but by the time Oanda executes the order the rate has changed to 1.1385. If you had an ... The market is not guaranteed to move in 1 pip increments. In a fast moving, illiquid market situation (the more common example of this is the few seconds after a major news announcement) you’ll find that the next valid buy or sell point is multiple pips away from where the last one was. If the market ‘skips’ over your order then it will not get executed. Adding the upper and lower bounds ...

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Upper Bound and Lower Bound Finding Zeros Using Synthetic ...

Upper Bound on Forward Settlement Price. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/deriva... How To Identify Trade Choppy Sideways Markets Forex Trading Strategies Optima's Futures Feedback How to trade sideways markets One of the most difficult yet unavoidable market conditions for ... bollinger bands trading strategy forex. Bollinger Bands are a technical chart indicator popular among traders across several financial markets. On a chart, Bollinger Bands are two "bands" that ... Have You Tried Using "Inside Information" to Find the 📈📉End of the Trend? - Duration: 8:50. Naked Forex 1,905 views As we noted, the Bollinger Bands trading tool consists of three lines – upper band, lower band, and a middle line. The middle line is a 20-period Simple Moving Average. It is calculated by ... Bollinger Bands and Trading Forex Markets ... Some technical analysts consider a market whose price approaches the upper band to be overbought, and a market whose price approaches the lower band ... Learn how to use the upper bound and lower bound when doing synthetic division to help you more quickly find the zeros. We go through an example in this free...

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