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Goldman Closes Out Its Top Trade For 2015 Which Expires Out Of The Money

Tyler Durden's picture




 

Only Goldman can call the direction of the biggest FX trade of 2015 - namely the collapse in the EURUSD - and still have a complete lose on the trade.

Recall that exactly one year ago, Goldman revealed its top trade for 2015, namely betting on EUR/$ downside via a one-year EUR/$ put spread. From the bank:

Position for EUR/$ downside via a one-year 1.20/1.15 put spread for around a 4.5 to 1 potential maximum payout.

 

We forecast that EUR/$ will fall to 1.15 over the next 12 months, in equal parts a reflection of our Dollar bullish view and Euro bearish outlook. In particular, given that HICP inflation is unlikely to rebound in coming months, there is a chance that additional ECB easing, including possibly sovereign QE, comes sooner rather than later, setting the stage for EUR/$ to move meaningfully lower in the short term.

On the surface this should have been a winning trade as the EURUSD currently trades well in the money. However, what happened in the interim is that Goldman, sensing the major payouts it would have to make to all those who put the trade on, decided to drag everyone deeped underwater and revised the strikes from 1.20-1.15 to 1.00-0.95.

Oops.

The result: Goldman's top trade for 2015 just expired out of the money. From Goldman:

Today we close our last remaining Top Trade recommendation to be short EUR/$ via a 1.00 – 0.95 put spread (initially struck at 1.20-1.15 with spot at 1.25), which expires out of the money incurring a loss of premium.

Actually, the loss is only for the clients. The winner? The counterparty which pocketed said premium from Goldman's clients. Goldman Sachs.

It continues:

Our initial target levels were reached sooner than expected and, aside from the August spike, EUR/$ has traded below 1.15 since January. However, our revised targets proved too ambitious for our 12-month timeframe. Following the March FOMC, the combination of a dovish Fed, the US Q1 growth scare and the Bund sell-off contributed to a reversal in EUR/$. Nevertheless, the recent move lower reflects the policy divergence we expected throughout the year, and we continue to think the combination of ECB easing and Fed tightening – likely to become concrete in December – will drive EUR/$ to 0.95 in 12 months.

Considering Goldman's track record of steamrolling muppets on every turn, the probability that the EURUSD will have surged into the 1.20 range or higher in 12 months is about 100%.

 

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Tue, 11/17/2015 - 11:22 | 6804418 Dr. Engali
Dr. Engali's picture

The Squid; offering the best advice the fed's funny money can't buy.

Tue, 11/17/2015 - 11:23 | 6804426 Latina Lover
Latina Lover's picture

Goldman made a killing off this trade, by taking the opposite side from their customers.

Tue, 11/17/2015 - 11:32 | 6804458 pods
pods's picture

Amazing how a company that recommends so many bad trades ends up so profitable.

/s

Tue, 11/17/2015 - 11:34 | 6804474 Ignatius
Ignatius's picture

Off book, off balance sheet drug money laundering operations probably fills a lot of gaps and Christmas stockings, I'd imagine.

Tue, 11/17/2015 - 12:07 | 6804636 KnuckleDragger-X
KnuckleDragger-X's picture

The middleman always makes money, especially when they are creating the bets.....

Tue, 11/17/2015 - 21:10 | 6807140 turtle
turtle's picture

I guess Paris did not deliver the EUR collapse quite as expected.  11.3. 11.5

http://www.veteranstoday.com/2015/11/13/charlie2/

 

Tue, 11/17/2015 - 11:43 | 6804514 SillySalesmanQu...
SillySalesmanQuestion's picture

Just listen to Gartman and Goldfed and lose all your money....all of time.

Poor Kermit...

Tue, 11/17/2015 - 11:49 | 6804550 pods
pods's picture

Amphibian Hate Fuck FTW!

Tue, 11/17/2015 - 11:54 | 6804571 Normalcy Bias
Normalcy Bias's picture

I suspect that a tiny, specially chosen subset of their customers made out very well on GS's advice here.

Tue, 11/17/2015 - 11:24 | 6804428 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Hell awaits the squid army and their underlings.

Tue, 11/17/2015 - 11:52 | 6804567 Babaloo
Babaloo's picture

Not wrong, just early. 

Tue, 11/17/2015 - 11:59 | 6804594 Spitzer
Spitzer's picture

Quit lapping up the anti Euro propaganda that is designed to pump the $eppos tires. The Piigs are all running positive trade balances for the first time in a decade. But not even Tyler wants to see this

Tue, 11/17/2015 - 14:49 | 6805343 Babaloo
Babaloo's picture

Come back in a few months when the euro is at 95 cents and tell me about anti-euro propaganda.  When the Fed tightens in December and the ECB is doing more QE, all the positive trade balances in the world ain't gonna stop the euro from going down.

 

 

Tue, 11/17/2015 - 12:16 | 6804659 Dr. Engali
Dr. Engali's picture

Early is still wrong, unless you're dealing with other people's money.

Tue, 11/17/2015 - 11:23 | 6804420 GMadScientist
GMadScientist's picture

Later, Muppetz, but please line up if you'd like to be cornholed again in 2016.

Tue, 11/17/2015 - 11:23 | 6804427 SpanishGoop
SpanishGoop's picture

Fuck you muppets.

Who the hell still has money with those guys ?

 

Tue, 11/17/2015 - 11:24 | 6804429 GMadScientist
GMadScientist's picture

ISIS.

Tue, 11/17/2015 - 11:29 | 6804441 SpanishGoop
SpanishGoop's picture

Their business is booming.

Does Goldman sell insurance ?

Real estate, life or other ?

 

 

 

Tue, 11/17/2015 - 11:47 | 6804541 GMadScientist
GMadScientist's picture

Of course, they also trade in certain smelly black commodities, and I don't mean Lebanese hashish (well, they do probably launder for those people but...).

Tue, 11/17/2015 - 11:27 | 6804444 orangegeek
orangegeek's picture

Obama

Tue, 11/17/2015 - 11:27 | 6804443 Dr. Engali
Dr. Engali's picture

Off topic: Another chemical blast in China:

 

Blast and fire reported at chemical factory in China’s Liaoning province

https://www.rt.com/news/322440-blast-chemical-plant-liaoning/

Tue, 11/17/2015 - 11:51 | 6804562 Consuelo
Consuelo's picture

"Get away from our islands...!!!"

 

 

Tue, 11/17/2015 - 11:31 | 6804451 MrBoompi
MrBoompi's picture

What was offered to the public was not the top trade.  The top trade was taking the other side of this bet, which isn't recommended to the general public.  And anyone who bets in the FX market with a known market manipulator deserves to lose his money, unless he's on the inside.  

Tue, 11/17/2015 - 11:48 | 6804489 Rainman
Rainman's picture

Look at it this way ...the Squid's muppet clients are simply paying the wristslap fine ( $130M ) for FX manipulation.

                     http://www.valuewalk.com/2015/06/settlements-by-large-banks-in-currency-manipulation-near-2-bil/

Tue, 11/17/2015 - 11:33 | 6804465 Stifmeister
Stifmeister's picture

FOREX movements have always been difficult for me to understand.

Can someone please explain why the expectation of ECB easing and FED tightening is driving the EUR/USD pair lower. EUR/USD downside means a weaker dollar and stronger euro doesn't it? I would expect the exact opposite.

Tue, 11/17/2015 - 13:22 | 6804889 herkomilchen
herkomilchen's picture

Currency pairs are not ratios, even though the way they are written looks as if they are.  EUR/USD actually means dollars per euro.  The currency before the slash is called the base currency and the currency after is called the quote currency.   The current price of the EUR/USD pair is expressed as how many dollars you have to pay to get 1 EUR.

USD/JPY is now 123.  We know a Japanese Yen is way less valuable than a U.S. dollar and sure enough this quote means the number of Yen you have to pay to get 1 USD.

So your analysis is correct, just a terminology issue.

Tue, 11/17/2015 - 14:31 | 6805248 wisebastard
wisebastard's picture

not much of a trade got some downside righ away and then it dry humped side ways for half a fucking century .................................

Tue, 11/17/2015 - 21:09 | 6807133 turtle
turtle's picture

I guess Paris did not deliver the EUR collapse quite as expected.  11.3. 11.5

http://www.veteranstoday.com/2015/11/13/charlie2/

 

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