Hi Maurice, To get started, for the model portfolio of USD 200,000, I plan to (upon market open) do this on NEM:
Borrow USD 100,000 of Yen at exchange rate of 131, interest rate at 1.125% per annum.
Short January 2002 (.nemmd) Put strike 20, 20 contracts, collect USD 1,900-2,300 premium
Short March (.nemow) Put strike 17.5, 10 contracts, collect USD 650-850 premium
Short June (.nemrw) Put strike 17.5, 10 contracts, collect USD 1,400-1,600 premium
Short January 2003 (.viemc) Put strike 15, 20 contracts, collect USD 2,500-2,900 premium
And …
Short June (.nemfe) Call strike 25, 20 contracts, collect USD 1,800-2,000 premium
Long January 2003 (.vieah) Call strike 40, 20 contracts, pay USD 700-900
Assuming all trades executes at aggregate average of middle of bid/ask, and assuming USD 25 per trade, we have the following portfolio position …
Borrowed 13,100,000 of Yen and converted to USD 100,000, w/ interest rate at 1.125% per annum, less USD 1,500 setup fee
Short January 2002 (.nemmd) Put strike 20, 20 contracts
Short March (.nemow) Put strike 17.5, 10 contracts
Short June (.nemrw) Put strike 17.5, 10 contracts
Short January 2003 (.viemc) Put strike 15, 20 contracts,
Short June (.nemfe) Call strike 25, 20 contracts, and
Long January 2003 (.vieah) Call strike 40, 20 contracts;
Cash at USD 306,500
Gross short NEM Put exposure at 60 contracts, average price of 17.5, or USD 105,000
Gross short NEM Call exposure at 20 contracts, strike 40, offset by long NEM Call at 20 contracts, strike 25, net exposure of USD 15 for 2,000 underlying shares, or USD 30,000 net exposure.
Please do not ask me for my logic and rationality, as ‘they just are’.
Chugs, Jay |
