Japan’s Debt Crisis a Follow-up Review

March 14th, 2012 | Posted by octafinance in Bonds | Currencies | Europe | Japan | Options - (2 Comments)

This is a continuation of the article “Japan’s debt crisis comes after Europe buy some long term OTM yen puts”

Surprisingly honest, Japanese Ministry of Finance official admits that “Japan is fiscally worse than Greece“. Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita said “Japan’s 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%”. It seems that Kinoshita is worried that there is a big risk of shocks even with large amount of JGBs that are held domestically. I completely agree with him as stated in my analysis.

And now a former top Japanese currency official:  “The Bank of Japan is locked into purchasing more government bonds and may contribute to a loosening of fiscal discipline in the world’s largest public debt market”. “Since they have come this far, if the BOJ stops purchasing bonds, there will be a fall in bond prices and huge valuation losses for banks.”  said Makoto Utsumi, former vice finance minister for international affairs and now president of Japan Credit Rating Agency Ltd.

BOJ last month increased bond purchases through its asset fund by 10 trillion yen ($123 billion) to $374 billion QE as part of measures to counter deflation and spur growth. That means that BOJ will monetize most of the deficit that Japan has. Don’t underestimate the significance of such program, the Japan’s economy is much smaller than the USA one.

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Japan’s debt crisis comes after Europe. Buy some long-term OTM Yen Puts

November 28th, 2011 | Posted by octafinance in Bonds | Currencies | Japan | Options | Trades - (2 Comments)

The chess and investing are similar processes. In order to be successful investors, we must foresee the coming, many moves before it happens and we must position ourselves for it.  I’m sharing this analysis with you so you can position yourself for the coming. I know that most of you are interested more of what is happening in Europe and it’s obvious as you are Europeans. But still I think that the best trade and most profitable trade from a risk/reward perspective is related to Japan. When we talk about Japan, I’m talking you about what will happen within the next 5 years as I believe that I’m many moves before the markets which are focused on Europe’s debt crisis.

In this analysis I will answer the following important questions:

1. Why Japan’s crisis will shake the world in few years?

2. Why for many years hedge fund managers betting against Japan lost money and why they were wrong?

3. How can I profit from what is coming? Why position now?

4. Why Japan’s debt and economy are not safe? Most people think Japan is save because: 

-  Japan is net creditor and have huge reserves.

- Japan has trade surplus so it gets more money than spends from outside.

- Japanese government bonds are locally hold so it’s not a target for sudden yield spikes or attacks from foreign bond holders.

I will prove you are wrong! And of course my final prove will come when you see Japan all over the news within the next 5 years at maximum. (more…)

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Gold put option sold for a 205% profit

September 23rd, 2011 | Posted by octafinance in Commodities | Gold | Options | Precious Metals | Trades - (Comments Off)

Today I sold my Gold put option that I bought for 49,66 USD/oz on August 23 2011. I sold it for 151,43 USD/oz, or a profit of 205% on my invested capital.

The gold put option was a position in my trading account. A speculative play that I make with less than 10% of my total trading account size. I use put options when I detect a parabolic rise of an asset. The options limit the possible loss if I’m wrong, but they also offer me opportunity to leverage my trade. I always buy out of-the-money options, so I pay cheap premium for the option. As after parabolic rise, I do expect huge correction, I prefer to buy cheap out-of-the options and risk less capital for a high return, if I’m right. I also buy the options for a short period of time. Usually I buy options for few months, so they are cheap. In this case my option was bought until November 15 2011.

Summary: Gold put option bought on August 23 2011, for 49,66/oz, with gold price strike 1770 USD/oz, and expiration date 15 October 2011. The gold option was sold on 23 September 2011, for 151,43 USD/oz or a 205% ROIC.

Please see my previous parabolic bets on Silver and Swiss franc and how they ended with huge profits.

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HKD Call option bought in portfolio

September 17th, 2011 | Posted by octafinance in Currencies | Options | Portfolio - (1 Comments)

Two countries share the same monetary policies but have absolutely different problems and solutions to them. I refer to USA and Hong Kong and their currencies, the USD and HKD.

Hong Kong shares U.S. monetary policy because of it’s currency. The HKD is pegged to the USD. Hong Kong import the U.S.’s ultra accommodative monetary policy. All factors for which HK decided to peg to the USD are no longer active. Now we are left only with the negative impact of the peg on Hong Kong. Consumer price inflation in Hong Kong is accelerating. The weak currency is intensifying the inflation problem.

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Gold put option bought due to parabolic move

August 23rd, 2011 | Posted by octafinance in Commodities | Gold | Options | Precious Metals | Trades - (Comments Off)

Today, August 23 2011, I bought gold put option at 49,66 USD/oz with a strike 1770 USD/oz and expiration date November 15 2011. The put option on gold is for 1.1% of my trading account. The rationale behind this trade is the parabolic move that I detected. To be honest, I’m extremely optimistic that gold and silver will rise long-term and I plan to buy more of these precious metals after they go down big. No matter how much I love some assets, now we must face reality and the fact that gold has risen in parabolic move due to public fear and buying of retail traders. Gold has been up 10 years in a row, which is very unusual in any asset class. I believe that gold is overdue for a deep correction. We have a huge standard deviation parabolic event, which could correct at least a few hundred dollars. When I detect a parabolic move, no matter what the asset is, I usually risk a small amount of my trading account to buy put options while try to be as precise with the timing as possible.

Parabolic moves always end badly. They form because super high optimism about an asset, many factors supporting it, and it goes much higher than 200 DMA. There is also another red flag that might help destroy the parabola and it’s “margin hikes”. (more…)

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USDCHF call option sold for a 187% profit

August 11th, 2011 | Posted by octafinance in Currencies | Options | Trades - (Comments Off)

Today I sold my USDCHF call option that I bought for 0,0146 on August 9 2011. I sold it for 0,042, or a profit of 187% on my invested capital. In fact, it has been only 3 days since I bought this option, but the SNB did an intervention and I believe that this move is enough for me to take profit. Interventions are usually ineffective and the safe-heaven status of the swiss franc will probably be tested again.

The USDCHF put option was a position in my trading account. A speculative play that I make with less than 10% of my total trading account size. I use put options when I detect a parabolic rise of an asset. The options limit the possible loss if I’m wrong, but they also offer me opportunity to leverage my trade. I always buy out-of-the money options, so I pay cheap premium for the option. As after parabolic rise, I do expect huge correction, I prefer to buy cheap out-of-the options and risk less capital for a high return, if I’m right. I also buy the options for a short period of time. Usually I buy options for few months, so they are cheap. In this case my option was bought until August 31 2011.

Summary: USDCHF put option bought on August 9 2011, for 0,0146 USD/oz, with strike 0,737, and expiration date August 31 2011. The USDCHF option was sold on August 11 2011, for 0,042 or a 187% ROIC.

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Swiss franc parabola

August 9th, 2011 | Posted by octafinance in Currencies | Options | Trades - (Comments Off)

Currencies rarely go parabolic. Guess how big the problems are. I’m sure that the swiss franc is appreciating because everyone in Europe is transferring money from unstable banks to Switzerland and many people expect the EUR to weaken. All these factors have contributed to a strong currency going parabolic. Today, August 9 2011, I bought USDCHF call option at 0,0146 with a strike 0,737 USDCHF and expiration date August 31 2011. The option is for 1.65% of my trading account. I’m not only bearish on the swiss franc due to extreme overvaluation, but I’m also optimistic on the USD appreciating this year, and even next year depending on whether the USA give tax incentives to companies to repatriate USD back to USA or not. The main rationale behind this trade is the parabolic move that I detected.

The swiss franc has risen in a super parabolic move due. The Swiss franc has appreciated 60% from the low in 2010. That’s unbelievable. Just in the last month CHF has risen 20% to the USD. I think that the swiss franc will soon crash due to actions by the SNB. Parabolic moves always end badly. They form because super high optimism about an asset, many factors supporting it, and it goes much higher than 200 DMA. The siwss franc is 20%+ higher than the 200 DMA.

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Silver put option sold for a 567% profit

April 21st, 2011 | Posted by octafinance in Commodities | Options | Precious Metals | Silver | Trades - (Comments Off)

Today I sold my Silver put option that I bought for 0,54 USD/oz on April 21 2011. I sold it for 3,62 USD/oz, or a profit of 567% on my invested capital. I have decided to take profit because silver post-top corrections after parabolic moves have been on average 30% (please refer to the image below). So far, silver has declined 30%, so I believe silver might correct and go up before going down hard again. I believe the direction of silver will be down because broken parabolas don’t recover fast if they ever do. I believe silver will recover and even exceed the 50 USD/oz high, but that will take long time.
Post-top corrections of silver
silver post-top corrections
The silver put option was a position in my trading account. A speculative play that I make with less than 10% of my total trading account size. I use put options when I detect a parabolic rise of an asset. The options limit the possible loss if I’m wrong, but they also offer me opportunity to leverage my trade. I always buy out-of-the money options, so I pay cheap premium for the option. As after parabolic rise, I do expect huge correction, I prefer to buy cheap out-of-the options and risk less capital for a high return, if I’m right. I also buy the options for a short period of time. Usually I buy options for few months, so they are cheap. In this case my option was bought until August 1 2011.

Summary: Silver put option bought on April 21 2011, for 0,54 USD/oz, with silver price strike 35 USD/oz, and expiration date August 1 2011. The silver option was sold on May 5 2011, for 3,62 USD/oz or a 567% ROIC.

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Silver put option bought due to gigantic parabola

April 21st, 2011 | Posted by octafinance in Commodities | Options | Precious Metals | Silver | Trades - (Comments Off)

Today, April 21 2011, I bought silver put option at 0,5438 USD/oz with a strike 35 USD/oz and expiration date August 1 2011. The put option on silver is for 0.87% of my trading account. The rationale behind this trade is the parabolic move that I detected. To be honest, I’m extremely optimistic that silver will rise long-term and I plan to buy more of silver when it corrects. No, we must face reality. Silver has risen in a super parabolic move due to speculation and shortage and retail traders bought it aggressively . Silver has risen between 2002 and 2011 – from 5 USD to 45 USD/oz or 900% for 9 years. I believe that silver will crash soon. We have a huge standard deviation parabolic event, which could correct at least 30%. When I detect a parabolic move, no matter what the asset is, I usually risk a small amount of my trading account to buy put options while try to be as precise with the timing as possible.

Parabolic moves always end badly. They form because super high optimism about an asset, many factors supporting it, and it goes much higher than 200 DMA. There is also another red flag that might help destroy the parabola and it’s “margin hikes”. Silver has risen between April 2010 and April 2011 – almost 160%. This is not sustainable rise and points to extreme speculation. We will get another opportunity to buy physical silver, but at much lower prices. (more…)

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