Thursday, July 14, 2011

Reducing 50% of CADMXN Long with 2.32% net gain

As posted on Twitter earlier:

Reducing the long CADMXN trade started on May 26th @ 11.91 spot reference. It was noticed on Twitter first and when I had the time available I wrote the fundamentals backing the tactical trade here.

The cross has rallied back to average levels and, considering its reduced volatility and its daily carry of around -0.7bp, I find it interesting to close out 50% of the trade @ 12.225 spot reference.
Nominal gains of 2.64%, with -0.32% in lost carry, totalling 2.32% for the lot.

The remaining 50% of the trade remain open, fundamentals not having changed one single bit since start of the trade. Just not a lot of short-term upside either as these pairs (as AUDBRL or MXNBRL, etc) have much smaller volatility and, against USD or EUR, trade with great correlation).

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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