Comments on: Whither the Dollar? http://www.tasgall.com/2006/12/11/whither-the-dollar/ Peering into the Cauldron of the Gods... Wed, 28 Sep 2011 10:20:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jason G. http://www.tasgall.com/2006/12/11/whither-the-dollar/comment-page-1/#comment-259 Jason G. Tue, 12 Dec 2006 22:59:30 +0000 http://www.tasgall.com/2006/12/11/whither-the-dollar/#comment-259 Why do you believe it's unlikely for the dollar to remain flat or remain in a trading range? (I'm challenging your thought process, not necessarily disagreeing with your point.) An option straddle is good when you expect volatility, but you have to cover the cost of both legs... I don't know how expensive currency options are, but time decay will penalize both sides of a straddle. If I wanted to trade dollar action, I could open a forex account. I believe a futures account would be required for options on currencies, and the nominal amounts are huge in comparison to stocks -- another hurdle to your option straddle idea. Outside of forex, I could bet on a rising dollar with the Rydex Rising Dollar Fund (RDPIX). If I were to bet against it, I might use a currency ETF (FXB, FXE, FXA, FXM, though probably not FXC). DBV (the currency harvest/carry trade ETF) should also benefit from a rising dollar since one of it's long positions is in the USD. In theory DBV would also pay the interest rate spread while you waited for a rebound. Gold should also do well if the dollar continues to fall, though I honestly expect it to do well even if the dollar is rising. This happened in 2005 -- the USD went from 80 to 92 (a 15% gain) while gold went from 400 to 525 (a 30% gain). Why do you believe it’s unlikely for the dollar to remain flat or remain in a trading range? (I’m challenging your thought process, not necessarily disagreeing with your point.)

An option straddle is good when you expect volatility, but you have to cover the cost of both legs… I don’t know how expensive currency options are, but time decay will penalize both sides of a straddle.

If I wanted to trade dollar action, I could open a forex account. I believe a futures account would be required for options on currencies, and the nominal amounts are huge in comparison to stocks — another hurdle to your option straddle idea.

Outside of forex, I could bet on a rising dollar with the Rydex Rising Dollar Fund (RDPIX). If I were to bet against it, I might use a currency ETF (FXB, FXE, FXA, FXM, though probably not FXC).

DBV (the currency harvest/carry trade ETF) should also benefit from a rising dollar since one of it’s long positions is in the USD. In theory DBV would also pay the interest rate spread while you waited for a rebound.

Gold should also do well if the dollar continues to fall, though I honestly expect it to do well even if the dollar is rising. This happened in 2005 — the USD went from 80 to 92 (a 15% gain) while gold went from 400 to 525 (a 30% gain).

]]> By: John http://www.tasgall.com/2006/12/11/whither-the-dollar/comment-page-1/#comment-258 John Tue, 12 Dec 2006 13:47:55 +0000 http://www.tasgall.com/2006/12/11/whither-the-dollar/#comment-258 Since it's unlikely for the dollar to remain flat, would the best play be an option straddle to profit from a significant move in either direction? I'm with you though--I'm thinking we're in for a stronger dollar 6 months hence thanks to the overwhelming sentiment that's come about mainly because of the recent precipitous drop. Since it’s unlikely for the dollar to remain flat, would the best play be an option straddle to profit from a significant move in either direction? I’m with you though–I’m thinking we’re in for a stronger dollar 6 months hence thanks to the overwhelming sentiment that’s come about mainly because of the recent precipitous drop.

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