Reply
Page 6 of 6 FirstFirst ... 3456
Like Tree43Likes

HSI - over 32000

  1. #51

    Join Date
    Oct 2010
    Posts
    14,949

    It's known as picking up pennies in front of a steamroller. You make a bit for a while but eventually you get flattened.


  2. #52

    Join Date
    Oct 2010
    Posts
    14,949

    Similar in that respect to those structured FX products that HSBC were mis-selling and bdw talked about for a while.

    shri likes this.

  3. #53
    bdw
    bdw is offline

    Join Date
    Feb 2009
    Posts
    4,390
    Quote Originally Posted by TheBrit
    Similar in that respect to those structured FX products that HSBC were mis-selling and bdw talked about for a while.
    Hey I still do them. I mean every time I want to send money to Australia I take out a 'premium deposit' (HSBC call them deposit plus) and I always do them for 7 days and get about 10% interest but its a gamble whether I get HKD or AUD. If I get HKD I roll the dice again for another 7 days until I get AUD. I'm not really sure what Im doing here but I think the consensus from a previous discussion with @jrkob was since I wanted to end up with AUD it doesnt really hurt to do this. It's more if you are gambling and wanting HKD back where there is a higher risk.

  4. #54

    Join Date
    Feb 2015
    Location
    Hong-Kong
    Posts
    4,192
    Quote Originally Posted by bdw
    the consensus from a previous discussion with @jrkob was since I wanted to end up with AUD it doesnt really hurt to do this.
    I remember the discussion very well but just to clarify that I was not part of the... "consensus" - should it have existed - agreeing that "it doesn't really hurt to do this".
    On the contrary, you posted the figures yourself: you got a high rate of interest for a couple of days, then the AUD put option you sold got exercised and you lost more than the interests you had earned: you overpaid for AUD and this hurt you. There is no way around this: you would have purchased AUD at a lower price against HKD should you have not bought HSBC's product. In fact, TB is of course absolutely right that the Bloomberg article depicts the product you are involved in, less the leveraged component. You just have to see through this... . Perhaps this should be moved to the old thread.

  5. #55

    Join Date
    Oct 2010
    Posts
    14,949
    Quote Originally Posted by bdw
    Hey I still do them. I mean every time I want to send money to Australia I take out a 'premium deposit' (HSBC call them deposit plus) and I always do them for 7 days and get about 10% interest but its a gamble whether I get HKD or AUD. If I get HKD I roll the dice again for another 7 days until I get AUD. I'm not really sure what Im doing here but I think the consensus from a previous discussion with @jrkob was since I wanted to end up with AUD it doesnt really hurt to do this. It's more if you are gambling and wanting HKD back where there is a higher risk.
    No no no that really wasn't the conclusion. The conclusion was you are selling a put option and receiving about a third of the premium to compensate you for the risk you are taking. HSBC assumes zero risk and pockets the other two thirds.

    The risk you take is being stuffed with a very unfavourable exchange rate.

  6. #56
    bdw
    bdw is offline

    Join Date
    Feb 2009
    Posts
    4,390
    Quote Originally Posted by jrkob
    @bdw yes you sold a put option on AUD . If you think about it, HSBC has the option to repay you in HKD or AUD (whichever is cheaper on the maturity date) and for this you are receiving a 10% coupon: you sold them this option. And the reasons you have given are perfectly understandable and typical of put sellers. In fact as I told you by PM it is very common for certain classes of market participants who "want to buy the underlying anyway" to sell puts as a way to juice up their expected returns: on bonds, on stocks etc...

    Good luck !
    I may have misunderstood, and there was a long thread about this a year ago, but your quote above @jrkob (from that old thread) was something that stuck in my head. ie since I "wanted to buy the underlying anyway", there was definitely a lower risk involved. Anyway I need to transfer another large sum in a few weeks so maybe something for me to research during CNY

  7. #57

    Join Date
    Feb 2015
    Location
    Hong-Kong
    Posts
    4,192
    Quote Originally Posted by bdw
    I may have misunderstood, and there was a long thread about this a year ago, but your quote above @jrkob (from that old thread) was something that stuck in my head. ie since I "wanted to buy the underlying anyway", there was definitely a lower risk involved. Anyway I need to transfer another large sum in a few weeks so maybe something for me to research during CNY
    You misunderstood me. Please re-read the entire thread.

    You have to buy "AUD anyway" to pay for your mortgage and you can't get around this. I never said "at any price" and my posts in your thread explained why these FX-linked deposits are a very bad alternative.

    I do not understand, and would not support, your reasons to buy AUD at an exchange rate that entitles you to a fair interest rate of 30% when you receive only 10% from HSBC.

    TB and I frankly have explained this in every possible way, and by the look of this discussion I am sure we didn't change our mind.

    This.... "misunderstanding" is now cleared I hope, and I apologize if I have given you the impression I supported these trades. I did my utmost to condemn them. With vigor.
    Last edited by jrkob; 13-02-2018 at 08:08 PM.

  8. #58

    Join Date
    Feb 2006
    Location
    Kennedy Town
    Posts
    909

    I have to agree with jrkob here that generally speaking over the counter stuff is always going to be a bad deal. If you want to speculate on FX the best way to do it would be with futures. At least then you're not getting screwed by the banks. With that said why a retail investor would want to speculate on FX is beyond me.


Reply
Page 6 of 6 FirstFirst ... 3456