Hi Bosco,
Yes, what I found interesting is that there is limited downside risk and potentially a big reward. There is little "pain" in being wrong:
"If he believed the peg would depreciate about 30%, as a
number of hedge-fund managers do, then it would have made
sense to enter the trade if he thought there was a one-in-four
chance of the peg going in a year. That's because the cost of
making the trade -- US$63,000 -- is less than one-fourth of
the potential profit of a 30% depreciation, or US$300,000.
For those who believe the peg might go, "it's a pretty good
trade," said Mr. Kaye, the hedge-fund manager. He said that
in recent months he hasn't shorted Hong Kong stocks or the
currency."
So, I think that the pigeons will keep on pecking! -Nice analogy-
Best regards, John. |
