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To: TobagoJack who wrote (39515)	10/12/2003 9:20:27 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 74559

Germany's Schlauch Says Euro Above $1.20 `Danger' to Recovery Oct. 10 (Bloomberg) -- German Deputy Economics Minister Rezzo Schlauch said the euro's exchange rate against the dollar would threaten the economy's efforts to pull out of recession if the dozen-nation currency exceeds $1.20. The euro's rise to above $1.18 in the past seven weeks was a ``massive jump'' and a further appreciation to above $1.20 would pose a ``danger'' to Germany's economy, Schlauch said in an interview with Bloomberg News after a press conference in Berlin. A further gain in Europe's single currency, which helped to erode exports in the first half, may curb a recovery this quarter, said the DIHK German industry and trade group, representing 3 million companies. A third of Germany's jobs depends on exports. The dollar has dropped 3 percent against the euro since the Group of Seven industrialized nations called for more flexible exchange rates on Sept. 20. The U.S. currency fell to $1.1794 per euro from $1.17 yesterday. Germany's economy is showing signs of recovery as unemployment fell for a third month in five in September and business confidence rose to a 2 1/2-year high in April, the Ifo institute's survey showed. Schlauch, Chancellor Gerhard Schroeder's policy coordinator for more than 3 million small and medium-sized companies, said the German economy ``has passed the worst'' and growth should accelerate in coming months. Deputy Finance Minister Karl Diller, in a separate interview on Wednesday, said the euro's exchange rate against the dollar isn't a concern as long as the single currency ``moves smoothly within the range of $1.15 to $1.20.'' Last Updated: October 10, 2003 07:57 EDT

To: TobagoJack who wrote (39515)	10/12/2003 9:57:36 AM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 74559

Jay there are the classic one that Dolinar described but not available to the retail investor, as the margin requirements are making them quite expensive. I was toiling with deep in the money options FX and it's efficiency is superior to that described by Dolinar. It has to do with DELTA hedging in an elaborate portfolio not as a standalone transaction. Further right timing could also reduce the actual price of the transaction. The limitation are the limited hedge you achieve in exchange of the flexible DELTA. If you have a option calculator you can see the superior DELTA adjustments in a let say buying a -200 pips call and selling a -550 pips call for one week. The option is cheaper than out right -200 pips put, and DELTA hedging is superior by around 0.08% which is substantial for a -200 pips put or call. The other aspect of this transaction is that you receive 350 pips in USD which will depreciate further if the EUR rises - a feature you do not have in buying a plain vanilla put. It is true that the transaction is similar to buying a -200 put and selling a -550 put but for short maturity the -550 put is almost worth less and the spread eats up all potential appreciation. Actual pricing for Oct 20, 2003: - 200 Put 23 -200 Call 216 - 500 Put 0 -500 Call 489 Net Spread 28 Cash 272 pips @ 3% volatility equals in cost to the plain vanila put