Expiry of barrier trades could cause dollar to plummet

Discussion in 'Trading' started by cartm, Jan 25, 2003.

  1. cartm


    Before I ask, I should preface this message by asking or suggesting a thread solely directed at questions/answers for trading etcetera. OK, I am not versed in the ways of forex, so those of you who are, could you explain or direct me to a link to a answer to what the heck a barrier trade is and what does this mean? How would this effect the dollar? Why would this effect the dollar? Thank you, and I will post a request of the aforementioned into feedback. Ciao
  2. must be barrier options trading, they are the most traded OTC exotics FX options, basically it's a gamble that the dollar will TOUCH a predetermined level, so those who sold barrier options for low strikes and have to keep a zero-delta portfolio must be shorting the dollar each time it falls, for hedging reasons. when the options expire or when they get in the money those short positions will be closed (note these barrier trades create support at the "strike" prices). also if the options expire worthless i don't think it will cause the dollar to tank on the contrary the option sellers will get rid of their hedging short positions. i am assuming the buyers can't manipulate the dollar to make the options "in the money" a plausible assumption i guess.
  3. cartm


    Thanks buzz, I think I know what you mean but am going to look into it further. (Even though I do not trade forex but leaving the option open to do someday.......no pun intended.)
  4. bone

    bone ET Sponsor

    With the exception of Iraq, all major OPEC nations insist on receiving Dollars for their oil.

    65% of Dollars are owned off-shore.

    Short the Dollar at your peril. The upticks are vicious.

    50% of the European GDP is the government.

    Japan is in a trillion dollar self-denial.
  5. TGregg


    Don't forget South America.
  6. taodr


    IMO that's why the German and French leaders came out last week against the war with Iraq. The more they piss around the more the euro is gaining and they love it but soon it's going to drop like a stone.
  7. garbo


    Some of them might love it, but not the exporters. Every percent the Euro gains raises their export prices by a percent, without increasing their profit at all.
  8. That is probably an accurate figure. Having lived in Europe most of my life, I sometimes think back and it sounds like a disgusting fact that more than a third of the "working" population are paid directly by the government and about an equal amount by mainly government-owned companies.

    But upon thorough reflection, I have two thoughts to offer:

    1. Just because it's government doesn't make it any less real or less important or less meaningful. Sometimes not even less profitable.

    2. That is all well and good, but I believe we agree that it's not the way to encourage enterprise or promote happiness. We should take a good look at Europe and take what is happening over there as a serious warning, because America is headed down the same path. It all starts by the government's taking away $10,000 per year from the average Joe who is "dumb" enough to get a job, endure all the pain involved in keeping it, and be responsible for himself and his dependents and giving part of it (actually, what little is not lost in corruption and inefficiencies) to the unfortunately more and more common "adaptive" average Joe who has realized that he can get paid almost as much as the working one or in some cases even more by staying at home, complaining about his knee or his mood swings, inseminating a few like-minded janes and spending his days as a procreator/consumer.

    It doesn't make him happy, it doesn't make the ones who pay for it happy, it doesn't even make the socialists/democrats who negotiate the corresponding laws happy. It's just one of the biggest traps / inherent flaws of democracy.

    I don't think there is anything anyone can do about it, except not going on welfare or similar benefits. But of course it takes a lot to be part of the intellectual / moral elite who don't accept government benefits although they are forced to pay income tax.