Saxo Bank recently launched a new set of reports available to its customers trading FX Options. They allow the astute investors to efficiently manage their risk exposure and efficiently reflect their market view in their trading. When trading FX Spot in a single currency pair, the situation is pretty simple: It gets a little more complicated when mixing several currency pairs together: What is my risk in each currency?
Still, this is not all that complicated, and a quick spreadsheet or a trusted calculator will provide you with the real picture and an accurate exposure. However, when adding FX Options to the mix, our trusted calculator starts to show it limitations.
What is the quickest and most efficient way to hedge my position? The FX Options reports have been designed to help you answer those questions by providing risk matrixes, very similar to those used by professional interbank FX options traders.
As such, they are invaluable tools for the active trader wishing to control risk and maximise opportunities. What are those reports?
The reports are designed to show your exposure to various factors under different scenario. The data is aggregated per currency pair, per currency itself or by individual position.
Reports will be available if you have at least one open vanilla option and will include both your FX positions and FX Options positions. More details about FX Option pricing and price sensitivities can be found in previous article in the FX Options blog and are widely available on the internet. However, for sake of ease, let us just review a few concepts, by looking at the first table in the summary tab:.
Shows a positive number if you are long, negative if you are short. For Spot, this shows how much the position is in profit or loss. Shows the equivalent FX Spot exposure of a given position. Sensitivity of a position with respect to the implied volatility used to price FX Options. Also known as time decay. This shows by how much the position will increase or decrease in value from one day to the next.
This table just shows the delta, but this time netted per currency rather than currency pairs. This is very useful to see triangulation risks, and to identify which cross a portfolio is most exposed to. Finally, the summary page displays a table showing the market sensitivites per individual position.
Although this might seem a little redundant with the other tables, this is actually quite useful to identify where a specific exposure comes from. For instance, we can see that our net EURUSD vega exposure sentitivity to implied volatility is mostly coming from our long position in 17 Jan , 1. As can be seen, this summary page provides a very good snapshot of the portfolio at a given time, and will be very useful to the active trader. Over the next few weeks, we will give more details about the other pages of these reports: Those allow the user to get a more detailed picture of their risk exposure as spot and volatility moves.
Use of these reports is for informational purposes only and should not be perceived as trading advice or a financial statement of profit and loss. No responsibility is assumed for any losses incurred as the result of information presented within.
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However, for sake of ease, let us just review a few concepts, by looking at the first table in the summary tab: Summary per position Finally, the summary page displays a table showing the market sensitivites per individual position.
I never made any money in Forex, nor did any investors I know. Personally, I think the whole thing is rigged, and NOT rigged in favor of the average person. I'm sticking with regular stocks and options from now on. I have a subscription to this newsletter called Daily Market Advantage; it shows me the best stocks to get. It's been correct about 7 out of 10 times in my experience. Here's a good review of it if you're interested: I very appreciate this information and thank you for providing it.
It is exactly what I was looking for in my Fx option trading. Hi William, sorry to hear about your FX trading experience. The reports described in this article more in the next couple of weeks are trying to provide better risk management tools that will definitely benefit the active FX trader. Hi JV, thanks for the kind words, and glad to hear that this will be useful to you in your trading!
I have been lucky enough to gainsay a revenue stream from FX but to trade requires money discipline I can say that as Beta tester of said reports over the last few months and an active options trader myself they have proven to be highly useful and easy to use. My 2 cents worth at least Hi Gustave - looks like a useful tool to add the the armoury. Looking forward to checking it out.
Re William's comment, the inference from your note suggests you might be using EA's etc. There are too many snakeoil salesmen and charlatans in the Forex sector and all other asset classes flogging get rich quick schemes that are simply useless. A deep dive into really understanding what drives the market I'm sure would make all the difference to your results. Looking in the report of the options position's I have open actually is like taking the fog out of glass and it is easier to spot why the portfolio is behaving the way it is , and also is pointing to more clearly to next Relevant articles for you.
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