Cap's Trading Diary

[Toofuzzy]

Hi Cap

Thanks for the really clear example. It helped me understand what people are doing, not that I want to take that risk myself.

>>>>Now what happens if the dollar drops to only 119 yen? I am short 1,200,000 yen, and originally that was balanced by my equivalent $10,000 long position in dollars. But now my dollars are only worth 1,190,000 yen. In order for me to pay back my loan from Japan, I need to come up with 10,000 more yen. At 119 to the dollar, this would cost me 10,000/119 = $84.<<<

I suppose it is a little better than the example above because you are taking in $450 in NET interest / year so it would take a 5 point increase ( to 115) in the value of the YEN to break even and then down to 114 to lose your capital.

A drop to that point doesn't seem imposible either though (only a 5% change).

Toofuzzy