If you own Canadian dollars and are making 1.70% why not make 10%+ for the same currency risk using no leverage?
1) Click here for current deposit rates, sort by highest to lowest to qualify best CAD rates.
To enlarge any image in this report click on it
2) Click here for futures market quotes
A) Use the contract with the highest volume
B) Check the price = 78.48
Check the underlying options
3) Choose the closest option delivery month
Click here for quotes used in this example
A) Closest delivery month (August)
B) Days to expiration (30)
C) CAD quotes in USD dollars (0.78430)
D) Contract size $100,000 Canadian, contract value $78,430 USD
A) In this case I’m writing the 78.000 put
B) I’m collecting $710.00
In other words I’m getting paid $710 to buy the Canadian $430 a contact better than where it’s currently trading
If it does not trade down to 0.7800 I keep the premium or am paid 0.0910% for the 30 day duration or 10.68% annually. Click here for quotes used in this example
5) If I already owned Canadian Dollars at 0.7843 I’d write the call 0.7900
Click here for quotes used in this example
A) The 0.7900 call expires in 30 days
B) I’ve collected option premium of $640
In other words I’m getting paid $640 on my position to sell the contract $570 better than where it’s currently trading.
Own at 0.7843
Called away at 0.7900
57 point at $10.00 a point = $570
Premium collected = $640
6) If the position does not trade up to 0.7900 I collected $640 or 0.0816% (0.9574% annually) and write another call for the next month.
If the market rallies and the position is called away my gain would be $1,210 or 18.10% annually
The $640 I collected by writing the covered call
The $570 I made on the trade from 0.7843
If the position is called away I repeat the process reentering by writing another put until the position is delivered. If it does not get delivered I’m collecting $500 to $950 per month in premium.
7) If you own Canadian Dollars you can take the currency risk for 1.70%
Or you can get paid 10% to 20% annually to take the same risk.
This brief report was written to provide the basics of the Canadian Dollar yield enhancement trade
If you’d like to review this in detail call me with this web page available and I’ll go through it will you allow 10-30 minutes
RISK DISCLOSURE STATEMENT
WE DO NOT HANDLE US ACCOUNTS
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
EXAMPLES OF HISTORIC PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR ARE LIKELY TO OCCUR. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS.
THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADE PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
BID/ASK SPREADS, BROKERAGE COMMISSION, CLEARING, EXCHANGE AND REGULATORY FEES WILL HAVE AN ADVERSE IMPACT ON THE NET OVERALL PERFORMANCE OF YOUR ACCOUNT. PRIOR TO MAKING A DECISION TO PARTICIPATE IN ANY INVESTMENT MAKE SURE YOU FULLY UNDERSTAND THE FEES ASSOCIATED WITH TRADING.
THE INFORMATION PROVIDED IN THIS REPORT CONTAINS RESEARCH, MARKET COMMENTARY AND TRADE RECOMMENDATIONS. YOU MAY BE SOLICITED FOR AN ACCOUNT BY ONE OF OUR REPRESENTATIVES OR EMPLOYEES. IT SHOULD BE KNOWN THAT THE REPRESENTATIVES OF ANY FIRM MAY TRADE FUTURES AND OPTIONS FOR THEIR OWN ACCOUNTS OR THOSE OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS MARGIN REQUIREMENTS, RISK FACTORS, TRADING OBJECTIVES, TRADING INSTRUCTIONS, TRADING STRATEGIES, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE LIQUIDATION OR INITIATION OF FUTURES OR OPTIONS POSITIONS MAY DIFFER FROM THE OPINIONS AND RECOMMENDATIONS FOUND IN THIS REPORT.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN DERIVATIVE CONTRACTS CAN BE SUBSTANTIAL THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING ANY LEVERAGED POSITION AND MUST BE IN A POSITION ASSUME LOSS FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR TRADE RESULTS.
PLEASE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND RESOURCES.