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What is the best way to short USD?

what you guys think … what is the best way to short dollar? I mean to ask against what? and also If I want to leverage my trade to the max; what are my options?

Also I have another question about the comex gold futures? On the nymex website it say the intial margin is $4,338 and the size of the contract is 100 t oz. Does it mean if I put $4,338 I can go long $964,000 worth of gold. I know I have to maintain the maintenance margin of $5,400.

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Buy Euros. In all honesty if you have to ask what it means to be short a currency you’re probably not ready to trade it.

all i want to do is create a highly leveraged short position on USD. I have thought about Euros, but after the downward revision of Eurozone GDP, I am not very bullish on EURO. Other than buying gold futures, how can I short dollar. My holding period range from 3 to 6 months, I have the back-up to survive volatility.

Preferably, not on american exchanges. Euronext dont have any gold contracts. Is there any european exchange I can buy gold.

If you are in the US and buying Euro denominated gold futures is probably the same as buying USD denominated gold futures.

My key assumption here is that Gold is USD denominated and a large part of the changes in the Euro price of gold will be explained by changes in the Euro/USD exchange rate.

You are undertaking the following transactions:
1) Going Long Euros & Short USD
2) In buying the Euro denominated futures, You are going short the Euro & Long the USD, and then Long Gold with the USD exposure.

Your forex exposures are cancelling each other out leaving you with USD Gold exposure, which would be a lot cheaper for you to get by trading on an American exchange.

Of course, if you are in Europe, you will only be undertaking the second leg of the transaction & the same logic applies that buying Euro denominated Gold will not give you short USD exposure.

I am in Asia … and I invest around the globe with little money I have… right now I have bunch of currencies in my portfolio … and some days back I almost sold everything … now I have bunch of USD sitting in my account that I am not very comfortable with … especially after friday events…

Here is what I am planning … long the gold in USD (short the dollar), and buy a put option on USD against euro in currency futures … I think recent action by US treasury will create some opportunities for short …

Honestly, this sort of answer is self-righteous and boring. #1 Maybe he can afford to learn by doing; no harm in it if you have a few $$$ to spare. #2 Perhaps our man is already long USD through some other position, which he is trying to hedge.

Re: What is the best way to short USD?
Posted by: farley013 (IP Logged) [hide posts from this user]
Date: July 14, 2008 01:14AM

Buy Euros. In all honesty if you have to ask what it means to be short a currency you’re probably not ready to trade it.

Why does Gold keep figuring in your transactions?!

if you simply bought the put option you speak about…you would be short the USD!

>Why does Gold keep figuring in your transactions?!

lol

bcoz gold gains very sharply in financial crisis… events happening these days are pointing to doomsday … and putting a small portion of portfolio in gold isnt bad for the portfolio health …. anybody can give me suggestions where to invest…

agree with that bit…but your stated objective was to short the USD…which does not need Gold exposure!

Etienne Wrote:
——————————————————-
> Honestly, this sort of answer is self-righteous
> and boring. #1 Maybe he can afford to learn by
> doing; no harm in it if you have a few $$$ to
> spare. #2 Perhaps our man is already long USD
> through some other position, which he is trying to
> hedge.
>
>
>
> Re: What is the best way to short USD?
> Posted by: farley013 (IP Logged)
> Date: July 14, 2008 01:14AM
>
>
> Buy Euros. In all honesty if you have to ask what
> it means to be short a currency you’re probably
> not ready to trade it.

Thank you, Etienne. This cop out answer is used way to much around here. If he’s not ready to trade it, the market will let him know.

Going long gold futures is a peculiar kind of way of shorting USD. It’s possible but it involves stuff like Indian demand for jewelry which is not a very pure bet on USD declining. If you don’t have a favored currency to be long, you could just short NYBOT dollar index which is a basket trade.

I disagree a bit with Etienne and XSellSide - the question sure sounds naive and a reasonable thing to do on AF is to protect people from doing stupid things. The answer to the question “Does it mean if I put $4,338 I can go long $964,000 worth of gold.” is almost surely not. You would have to find a broker willing to give you the exchange minimum margin requirements and you need to be pretty big for that.

I’m Da Church of the faithful, I’m Liao Fengyi, clergywoman mother should have to introduce you to me, I have seen you twice, in which time you are more impressed with everyone I guess in the back of the church at noon to eat noodle face!

JDV,

Isnt Long gold more of a long USD than a short USD?

i.e. because Gold is a USD denomianted commodity?

Syd_RE Wrote:
——————————————————-
> JDV,
>
> Isnt Long gold more of a long USD than a short
> USD?
>
> i.e. because Gold is a USD denomianted commodity?

But demand is global, so if the dollar weakens the price of gold (in USD) goes up, assuming it stays flat in other currency terms.

Its the same way that long oil has some short USD risk embedded.

Suppose that gold stays constant against the Euro at 600 Euros/ounce. In USD terms that is about 600/0.6 = $1000/oz. Now the USD depreciates against the Euro to 0.5 Euro/Dollar but gold stays constant against Euro. Now Gold is USD terms = 600/0.5 = $1200/ oz. Being long gold gives you a positive return when dollars drop.

Of course, here the pure play would be against Euros but you can make a case (a stupid one, but a case) that gold is the universal currency and long gold is short USD or with some change of numeraire, short any currency.

I’m Da Church of the faithful, I’m Liao Fengyi, clergywoman mother should have to introduce you to me, I have seen you twice, in which time you are more impressed with everyone I guess in the back of the church at noon to eat noodle face!

Syd, the denomination currency isn’t all that relevant, because the price in dollars should be the same as the price in euros or whatnot, given current exchange rates. If not, you could buy one, sell the other and make a profit with essentially no risk. Free money machines like that don’t tend to exist for very long without bringing prices back in line.

Gold tends to be used as an inflation hedge, since if the dollar buys less stuff per unit in general, it should buy less of the globally desired yellow metal.

If you want to short the dollar, you probably should think of a currency pair that might do well, like AUD or possibly CAD, both commodity based economies that are developed. If you don’t have a counter pair that you have some conviction about, you could use a basket of currencies, or a commodity like gold or oil, though as Joey mentioned, those are less of a pure currency play because demand for the commodities could shift for non-currency related reasons.

You want a quote?  Haven’t I written enough already???

I would suggest ETFs, but considering that you are going for maximum pain/gain, ETFs are not the way to go for you. If I had to bet, I’d probably go with an Asian currency.

you can buy UDN, which is PowerShares US Dollar Index Bearish ETF and is comprised of short USDX futures contracts.

thanks much guys …. I always value your excellent discussion on the forum … I often trade equities .. and never thought of currency or futures … but these days equities are not paying off … so I thought about currency and commodities and on the way I will learn too … What other sources you guys suggest to learn to trade in currencies and commodities … plz advice.

Joey I have more than USD 200K in my account … and I have a private banking account with HB AG Zurich Dubai… is that good enough to trade in commodities … I dont want to look stupid in front of my relationship manager…

I’m a Canadian and would suggest buying Canadian dollars; Canada has strong oil and gold exposure without being directly in one or the other but demand for Canadian dollars for these products which amount to about 50% of our total GDP (Energy and Materials) will cause demand for CDN$ go rise. Its so unpredicable as oil and gold prices are, that the estimated range for the CDN$ for the next couple years is $0.90-$1.10; currently at $0.995.

…or short UUP. But, you won’t be able to use as much leverage as using currency or derivatives directly, if that’s what you are looking for.

Buy the FXE on margin. You will be going leverage long the Euro. Or you could buy the Rydex Weakening Dollar Mutual Fund. This provides 2x Inverse leveraged exposure to the DXY index.

Or just trade the futures contract. The average daily move on the thing is a few hundred bucks. If you can’t afford to bet a few thousand bucks on this kind of thing, you shouldn’t be in the game.

I’m Da Church of the faithful, I’m Liao Fengyi, clergywoman mother should have to introduce you to me, I have seen you twice, in which time you are more impressed with everyone I guess in the back of the church at noon to eat noodle face!

if you want a systematic trade against USD, i.e. without any perspective on other currencies, buy a basket of foreign currency futures (3-4 major currencies will give you the short USD systematic exposure you desire - say euro, jpy, ukp, swf). remember, if your futures notional is larger than your cash positions, you are leveraging - be prepared for consequences.

gold is an entirely separate asset class, that merits a separate decision.

^ That’s what the NYBOT dollar index is.

I’m Da Church of the faithful, I’m Liao Fengyi, clergywoman mother should have to introduce you to me, I have seen you twice, in which time you are more impressed with everyone I guess in the back of the church at noon to eat noodle face!

you can buy FXE which is the euro etf, but i wouldn’t do it.

I knew I should’ve shorted gold and gone long the dollar when a retail investor goes on a CFA message board asking how to short the dollar and get long $964,000 of gold with $4,338 in his brokerage account. This thread was started at almost the exact top of gold and exact bottom for the dollar this month.

haha well put farley…. If I was going to long any foreign it would be the CNY.

CZK/HUF/PLN have made some good moves recently as well.

I think there’s almost a 100% chance the CNY appreciates against the USD from here, but the question is how fast and are there better investments from an IRR perspective.