[lbo-talk] Re: Dismissing IMF

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Thu Jan 8 16:26:58 PST 2004



> what do you suggest as an efficient way
> to short the US dollar for small capitals _in_ the US?

What everyone else uses: futures! :-)

If, for instance, you think the US dollar is going to continue to go down against the Euro, you'd enter into a long EuroFX (quoted in dollars-per-Euro) contract:

http://www.cme.com/prd/overview_EC2465.html

The contract size is 125,000 Euro. A single tick of 0.0001 is equivalent to $12.50 so today's close of 1.2739, which is up .0117 or $0.0117 (i.e., a little more than a penny) -- up in this case means the Euro got more expensive -- from yesterday. If you were long one of these contracts going into today, at the end of the day you would have made 117 * $12.50 = $1462.50 (ignoring your round-trip comission, YYMV).

A single contract of EuroFX typically requires about $2500 of initial margin, and $1850 of maintenance margin. So putting down $2500 yesterday would give you about $4000 total today. That ought to make you feel better about your dollars. Sounds great, right? If the current price goes from 1.2739 to 1.2539 (i.e., 200 ticks), you lose your entire $2500. This is for a single contract.

Here's a place to paper-trade if you want:

http://lind-waldock.com/edu/ed_papertrade.shtml

/jordan

ps: Why do I just feel like I gave you instructions on how to shoot heroin? pps: I'm not a professional, and I don't give advice. ppps: I have a dream: that everyone who has a strong opinion about a commodity and it's price trade futures. At least once.



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