Viet, you're basically trading short strangles (selling calls and puts at strikes above/below the market). I don't know if anyone has told you that this is quite risky, but if not, let me do that here and now. Short straddles on stock index options are a bit dicey, but on forex pairs it could wipe you out. Look at the SNB situation in 2015 and think through what might occur with what you're doing with naked short options. A really big move would not only wipe you out, but you'd be on the hook to take delivery of the losing side of the pair. If these are exchange trades forex options, the broker can't/won't waive the liability.
If you really want to do these range trade strategies with forex options, check out strategies like butterflies or iron condors as they aren't naked (as you buy a protective call + put) so you've got some cover if there is a really big and unexpected move.
Many thanks for you advice. Yes, I really wanted to trade Bear Call Spread, Bull Put Spread and Iron Condors. However, the forex options market is so thin such that premium don't exist where I want to cover the naked shorts. I spoke about this a few times in my live options trading videos. My (temporary) solution for this was to cover the naked shorts when I can actually buy them. If the trade was in my favour then there would be no need. Otherwise, I would cover at the more expensive premium.
Viet, you're basically trading short strangles (selling calls and puts at strikes above/below the market). I don't know if anyone has told you that this is quite risky, but if not, let me do that here and now. Short straddles on stock index options are a bit dicey, but on forex pairs it could wipe you out. Look at the SNB situation in 2015 and think through what might occur with what you're doing with naked short options. A really big move would not only wipe you out, but you'd be on the hook to take delivery of the losing side of the pair. If these are exchange trades forex options, the broker can't/won't waive the liability.
ReplyDeleteIf you really want to do these range trade strategies with forex options, check out strategies like butterflies or iron condors as they aren't naked (as you buy a protective call + put) so you've got some cover if there is a really big and unexpected move.
Many thanks for you advice. Yes, I really wanted to trade Bear Call Spread, Bull Put Spread and Iron Condors. However, the forex options market is so thin such that premium don't exist where I want to cover the naked shorts. I spoke about this a few times in my live options trading videos. My (temporary) solution for this was to cover the naked shorts when I can actually buy them. If the trade was in my favour then there would be no need. Otherwise, I would cover at the more expensive premium.
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