My play on this would be buying the July10 FXI 39.00 Puts at $1.04 Even though they are up 1000% from yesterday that big 7% drop in the underlying (FXI) could easily continue during the next two days. Paper-trade 1 contract July10 FXI 39.00 Put at $1.04, FXI at $38.95. Lets see how it does.
Perfect. I bought the 42/42.5 Jul15 put debit spread for 40 cents earlier today at $39.97, so we'll see which strategy works out. fxfx is aiming for the home run, I'm playing expectation.
I will try and put this as delicately as I can. !!! THE R:R IS THE FUCKING SHITS ON THAT DEBIT SPREAD - GIVE YOUR HEAD A SHAKE !!!
For those who don't watch Asian markets, Hang Seng dropped 2300 points yesterday rallied 2000 points today to close.
Risk and reward don't tell the whole story. You need to consider expectation. Your odds of profitability are much lower than mine. When I put on my debit spread, the expectation of FXI expiring below 42 ($10 profit) was 85%. The expectation of it expiring above $42.50 ($40 loss) was 9%. The expectation of expiring in between was 6% (call it $15 loss). (0.85*$10) - (0.06*15) - (0.09*40) = $4 profit expectation At expiry, I need FXI to be below $42. You need it to be below $38.96. Your potential profit is much higher than mine, but you need to account for the fact that the odds of achieving that home run are very very small. I know you won't agree and you'll just spew your nonsense but why not consider the possibility that other people have different styles than you and that yours is not the only path to making money?
http://www.elitetrader.com/et/index.php?threads/nothing-but-china.291921/page-3 Note the date of the "call".