A Strategy to go long or short the USDollar Index

[Jim Nickerson]

I posted something on this somewhere within the bowels of iTulip at the first of the year, but I cannot find it by searching, so I'll bring it up again.

http://www.financialsense.com/editor...2007/0101.html

This article outlined a stategy based on the high and lows for the US Dollar Index established during the first 8 trading days of January.

You can read the statistics for possibly engaging in the speculation in the article.

First, we will allow the buck to trade for the first eight trading days of January to establish a price range.
Second, we will "bracket" the US dollar index by placing a buy stop above the highest high of the first eight trading days and a sell stop below the lowest low of the first eight trading days. When one of the stops is elected it will initiate the entry into the market. The other stop will then become the initial protective stop for the position.
Third, once the trade has become favorable by at least 260 points, the protective stop is then moved to the original entry stop order price to reduce the risk down to just the commissions and potential price slippage. Traders with multiple contracts should liquidate half of the position at a 260 point profit as well. This locks in a net profit on the trade.
Fourth, if we continue to ride this trade all year without getting stopped out, we will exit the position during the last trading week of the year to complete the trade. Then we will simply wait for the new trade parameters for the next year.

Eight days of trading on 2007 for USDX are now history. The intraday low of 83.17 occurred on 1/3/07. The intraday high of 85.40 occurred on 1/12/07.

If I understand this correctly, in the coming days or weeks, when either 83.17 is broken to the downside, or 85.40 is broken to the upside, then one wishing to enter this speculation would place the appropriate bet: 83.17 gets broken, go short; 85.40 gets broken, go long.

Having no knowledge or abilities to trade options-which is how I guess sophisticated investors could play this bet--the possibilities that are open to me are four mutual funds: Rydex RYSBX that seeks to provide 200% of the performance of the USDX by investing in derivatives, or Rydex RYWBX that seeks to match 200% of the inverse performance of the USDX by investing in derivatives.
http://www.rydexfunds.com/ourproducts/index.shtml

Also, Profunds offers RDPIX and FDPIX, rising dollar and falling dollar respectively, that move approximately the same percentage with or against movements in the USDX.

http://profunds.com/profiles/profile.asp?id=131 Rising dollar.

http://profunds.com/profiles/profile.asp?id=132 Falling dollar.

At Schwab these Profunds are no fee funds, and orders must be placed before 4:00PM EST.

There may be other ways using funds that are not leveraged, and if anyone knows of any other mutual funds or ETF's that would allow one to play this game, please post them.

A question might arise as to how to follow the US Dollar Index during the day?

Barcharts.com has delayed prices at http://www2.barchart.com/mktcom.asp

online.wsj.com (subscription required) http://online.wsj.com/mdc/public/pag..._topnav_2_3000 also has intraday quotes which are delayed too.

There may be some better way to follow intraday pricing for free.

At Schwab and RYSBX and RYWBX (I guess it is apparent to all "SB" = strong buck, "WB = weak buck) trade without Schwab fees and have cutoff times for orders at 4:00PM EST.

[jk]

Re: A Strategy to go long or short the USDollar Index

jim, schwab may not charge a trading fee, but i believe you'd still be subject to penalty if you closed the position within the "short term" - which they define as 180days. you'd better check.

[Jim Nickerson]

Re: A Strategy to go long or short the USDollar Index

jim, schwab may not charge a trading fee, but i believe you'd still be subject to penalty if you closed the position within the "short term" - which they define as 180days. you'd better check.

jk, check it for yourself, but I believe you can buy these funds Tuesday and sell them Wednesday without incurring a short-term trading fee on any of the four I listed. I do not believe I have that wrong.