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Shorting the Dollar


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Instead of my usual going long CHF I took a hard look at the USD and noticed that they are priced significantly less than CHF long positions.

 

I can get an extra 3 months of option time for the same price with the USD. I will dong the CHF soon but I like holding the USD Dec 100 shorts for the following reasons:

 

1. Liquidity: The USD is a very liquid market and as a result the bid/ask spreads tend to be a lot closer. It is also faster to enter and exit trades.

 

2. Volatility: I am trying to position myself in such a way that I am not whipsawed up and down and am forced to constantly watch the tape and worry about having to cover. These are Dec options and as such I am certain there will be an easy exit with profit before that time.

 

3. Sigma 10: I do believe this is a strong possibility. If it happens I am positioned for it and if not I will simply ride it out.

 

4. Foreigners dumping US assets: I think the Bush team did not adequately plan for the war. They falsely believed they could fire some cruise missles, waltz into Bagdad and have the whole thing wrapped up in 6 weeks.

 

As they get more desperate, they are going to incur high civilian and US casualties and bomb the crap out of Bagdad. I think the US is going to suffer a loss of prestige and altitude that will take a generation to recover from, if that.

 

This also plays right into the hands of the EEC. If this isn't handled properly we could see a dollar dump en masse. That WOULD crash the markets really good PPT or No.

 

I have seen a lot of statements to the effect that the world can't survive without a strong dollar. This is not true. The EEC has been getting screwed just like us bears for a long time and those folks want to see some economic justice.

 

The purpose of the Euro was to knock the dollar off the hill and become equal to it or stronger. If there are enough outrages in Iraq there will be a dollar dump. All JMHO.

Comments welcome.

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