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22.06.2016 20:29 - GBPCAD may be a rewarding Brexit option
Автор: goro82 Категория: Бизнес   
Прочетен: 471 Коментари: 1 Гласове:
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1. goro82 - Background The UK referendum ...
22.06.2016 20:30
Background

The UK referendum on EU membership comes up tomorrow and at this point, various polls suggest that Remain has a slim lead. UK bookmaker Ladbrokes predicts a 76% chance that Remain will prevail.

Consequently, GBPUSD and GBPCAD have recouped the losses incurred in June, when the Leave side was leading in the polls.

The GBPCAD downtrend from January remains intact while trading below 1.9000 which is guarding the 38.2% Fibonacci retracement level of the January-June range. A break below 1.8670 would suggest further downside and reduce the risk of the option expiring in the money.

The intraday and short-term GBPCAD technicals are bearish and this week’s rebound in prices implies that if GBPCAD rallies post-referendum, topside gains will be limited.

It also implies that the risk/reward favours the downside.

Selling a two-day GBPCAD Call option may be a good vehicle to express this view.

Management and risk description

This trade is a loser if GBPCAD is higher than 1.9200 at expiry at 10:00 am EDT (New York cut). In the event of a Remain victory, GBPCAD should rally.

The naked 1.9050 exposure will need to be managed to preserve the premium and/or mitigate losses if the initial post-referendum spike is higher than 1.9200.

Note: Your losses are theoretically unlimited above 1.9200 so you must monitor this trade.

Parameters

Entry: sell GBPCAD Call option, Strike 1.9050, expiry 24Jun16, (NY cut) and earn .0150 points

Performance: if GBPCAD is above 1.9050 at expiry, you are obligated to sell GBPCAD at 1.9050; if GBPCAD is below 1.9050 at expry, the option expires worthless and you keep the premium (0.0150 points)

GBPCAD spot reference: 1.8750.

Time horizon: close 1000 EST, Friday June 24

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Автор: goro82
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