Greek Debt Swap: Week Round Up

(3rd March to 9th March 2012)

On the 3^rd of February 2012 we were sitting on MTM value on the EURUSD put of 7%, by the 6^th March we were looking at a bid offer of 99/101, this gave way to locking in some profit. As one of our philosophies is playing the average this seemed like a good idea especially as news coming out of Greece was becoming more and more positive.

JF’s thinking lead to options, as previously written, because a positive LTRO followed by a Greek bailout would have lead to a large spike on any EURUSD rate therefore the put option was limiting us to one sided risk.

As we moved to the latter part of last week and it became obvious that the CACs (collective action clauses) will occur and the debt haircut swap will go ahead our option’s value moves closer to 0, reinforcing our profit seize as said above, although the position will still stay open as it seems pointless to close due to the nature of options- it cant get worse. The position therefore makes a total minimum gain of 10.22%, although more would have been nicer we cannot complain.

While all of this was happening JF did some P&L doctoring, or the "P&L mechanic" as our trader called it, using some intra day trades in AUDUSD (sell on 7th), EURUSD (sell on 7^th and 8^th) and XAGUSD, silver in USD, (buy). As Thursday drew to a close XAGUSD was up, see trend lines below for entry and exit positions.

This trend and the other currency trades, as above, meant loses suffered in changes of EURUSD on JF’s put option due to such a positive Greek bailout and with limited affect on bank balance sheets of the haircut and a limited affect on insurance groups (CDS were activated as a credit event was determined) were limited. So in summery an interesting week both for the EZ and JF, watch this space......




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This report was written by a JF contributor not directly involved in placing any of the trades/actions listed above for the aim of trying to objective. To raise any issues or ask any questions please feel free to get in contact with the team by commenting or emailing JFCapitalUK@gmail.com