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Zobacz pełną wersję : Can carry trade interest pay for long option premium?



Verokika99
07-20-2013 15:10, 15:10
Is it possible to go long a carry pair like AUD/USD via a long call and have the premium for the option paid for by the carry interested earned? In other words, this would make it possible to hold a free position. Or has this already been priced in the option premium?

pilibergado
10-17-2021 08:07, 08:07
There are still brokers that offer FX options? Last I heard, there wasn't enough demand and most places stopped offering them.

Hegpk
10-17-2021 09:28, 09:28
As you are purchasing an option to buy an instrument at some point in the future, then you will not own it until the expiry time, if you exercise the option. So I don't see that you can receive interest for the period that you don't own the instrument.

Verokika99
10-17-2021 10:49, 10:49
As you are purchasing an option to buy an instrument at some point in the future, then you will not own it until the expiry time, if you exercise the option. So I don't see that you can receive interest for the period that you don't own the instrument.
That's what I thought until I read this line in Hedge Fund Wizards:

We did a lot of our trades through options— positions like buying calls in currencies with a carry because the positive carry paid for your option.
This is from the interview with Macro trader Colm O'Shea. I am guessing these might be options that retail traders do not have access to? But apparently it can be done.

lapkle
10-17-2021 12:10, 12:10
someone correct me if I'm wrong, but there's no carry in the derivatives trade - if you want the benefit of carry you'd need to be trading directly the spot fx or swaps.

Verokika99
10-17-2021 13:30, 13:30
someone correct me if I'm wrong, but there's no carry in the derivatives trade - if you want the benefit of carry you'd need to be trading directly the spot fx or swaps.
That's why I don't get how ColmO'Shea is able to place these trades for his hedge fund.

OxsgelVX
10-17-2021 14:51, 14:51
Yes, carry can help offset the cost of the option (it's not actual physical carry, in this case, but rather the term structure of the forwards that is implied by the positive carry). It's relatively rare, however, that this carry fully offsets the cost of the optionality, as that would be a free lunch. Still, it happens sometimes and there are some markets even now where this is the case (very hard to take advantage of). And no, to my knowledge, AUDUSD isn't one of these mkts.

Verokika99
10-17-2021 16:12, 16:12
Yes, carry can help offset the cost of the option (it's not actual physical carry, in this case, but rather the term structure of the forwards that is implied by the positive carry). It's relatively rare, however, that this carry fully offsets the cost of the optionality, as that would be a free lunch. Still, it happens sometimes and there are some markets even now where this is the case (very hard to take advantage of). And no, to my knowledge, AUDUSD isn't one of these mkts.
Martinghoul, thank you for this. Do you know the mkts where this is still possible?

Lauri
10-17-2021 17:33, 17:33
i actively trade forex options.... there should be several posts of mine on the subject..... can never ever remember noticing receiving or paying swap/interest on any trade.... options just don't entitle you to interest or dividends..... half suspect what o'shea meant by buying calls in currencies with a carry was they were long the audusd by spot trades and at the same time were long via calls.... so the carry trade help out with the price of a call..... such as, being long 10 standard lots of audusd and being long 2 'aum' calls..... using the swap to cover much of the long calls cost....... 'aux' moves inverse of the spot price so it could not be used and also the bid/ask spread will kill ya..... the spread on the 'ndo' is equally high...... for this to work the swap would need to be high and the trades lengthy.....h

lapkle
10-17-2021 18:53, 18:53
i actively trade forex options.... there should be several posts of mine on the subject..... can never ever remember noticing receiving or paying swap/interest on any trade.... options just don't entitle you to interest or dividends.....
right, there's no outright swap via derivatives because you are not buying/selling the underlying, only the right to buy/sell...

OxsgelVX
10-17-2021 20:14, 20:14
{cytat} , dziękuję za to. Czy znasz mkts, gdzie jest to nadal możliwe?
Cóż, długoterminowe opcje, które obejmują tradycyjne waluty finansowania (np. JPY i CHF), to miejsce, w którym zazwyczaj się to sprawdza. I nie, transakcja, którą opisywał Colm, nie polegała na kupowaniu spot i wykorzystaniu rzeczywistego przeniesienia do zrównoważenia kosztu opcji, jak ktoś sugerował. To byłoby raczej głupie. Oznacza to po prostu co następuje (te liczby nie są prawdziwe): powiedzmy, że kupuję 2-letnie opcje sprzedaży CHFNOK 6.0; ATM fwd wynosi średnio 6,625, a opcja kosztuje 1,5%. Załóżmy, że z jakiegokolwiek powodu, przy rocznym przepływie ATM na poziomie 6,495, roczna sprzedaż 6,0% kosztuje obecnie tyle samo 1,5%. W tym przypadku slajd (może znajdować się zarówno w strukturze terminowej fwds, jak i vol) całkowicie opłaca 1 rok utrzymywania opcji, czyniąc opcjonalność darmową. W rzeczywistości generalnie musisz pójść dalej i użyć naprawdę soczystych krzyżówek EM, aby uzyskać taki efekt. Darmowe obiady nie są powszechne.