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Short-Term FX-Risk Decoupling Collapses As Expected
Yesterday, before the market close we urged riskfree tolerant readers to take a long hard look at the ES-EURJPY spread, i.e., sell ES and buy EURJPY, as the spread had blown out: "Selling ES and going long EURJPY is now pretty much risk free." Well, whoever did, congratulations: the spread is now back to zero. If you used unlimited leverage as suggested, your unlimited P&L should provide for a fun Ukraine-Hampton JV filled weekend. And with that our thesis that idiotic computers run the market and have no clue what signals or correlations to even look at eny more, is proven right for the second time this week.
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Anyone know how long it takes to reboot the computer and restart the algos? I would like to go long for a few hours once they restart them.
-1.07
crab, check your math
,
Help with the "entertainment" bill in Sitges....
I'm sticking by this, from yesterday...
by Turd Ferguson
on Thu, 06/03/2010 - 12:03
#392116
I'm kinda thinking they are gonna let it go thru 1.21 this time just to fuck everybody. Then, once everybody gets short at about 1.1950-1.200, the ECB will come in and shove a euro-shaped auger right up the shorts asses and drive it back to 1.2250
an awesome auger. thanks billy mays
Thats the kind of auger they need to drill those relief wells
I prefer.... ShamWoW!
I'm with Turd.
Why are stocks linked to EJ anyway?
Wouldn't AUDJPY be a better bet for the carry trade on longs?
The market is capitulating!
Fuck yo couch Bernanke!
+100
going long EUR/YEN is pretty much risk free? what am i missing about this?
http://www.forexhelp.com/charts-eurjpy/15/
This is an arbitrage strategy.
The decoupling was bound to regain, thus, going long EURJPY while selling ES is a risk-free trade because even though EURJPY fell, ES fell more and thus you are net positive on the trade.
If both were to rise, re-coupling would again produce a net positive trade.
So you see, whether a rise or fall in the markets were to happen, you make money when the pair re-couples.
A very good hedgie strategy indeed!
Massive Kudos to Tyler for pointing this out!
or you could have remained short both eur/yen and short ES...and profited more. but i can see how that would be less risk free....but it doesnt take a rocket scientist to see that the eur/yen was going to go down to recouple with es...as europe continues to implode.
Yes, but the strategy of hedge funds is very different: Massive leverage, smallest risk.
But why EURJPY?
Why the correlation with this pair? What about AUDJPY, etc.
Why historically does EJ have the link with the stock market?
Many other pairs exist across various asset classes and they are very dynamic. This is why a hedge fund (a good one at least) is only as good as it's analysts.
Determining the proper pairs for a long/short strategy fund ensures that the fund has very low beta and controls the profitability of the fund.
I am not using algos...is it a sin nowadays ? :=)
Pardon my ignorance but what is "ES"?
http://en.wikipedia.org/wiki/E-mini_S%26P
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