How do I bet on the yen vs. USD?

[MrMore]

Obviously I have no background in this. Nonetheless, in the same way that I bet sports futures sometimes, I'd like to bet that the yen appreciates against the dollar over the next few years. And yes, I'd like a long timeframe like that, so as not to get punished by noise. I'd like to bet about 10k, and don't mind the risk. Let's say I'd like to structure the bet so as to make at least 10x return if I'm right, that the yen rises by at least 10%.

Because I can't walk into a casino and make this bet, can someone explain the mechanics of making such a wager with, I presume, a broker of some sort?

Thanks.

[stinkypete]

i'm not gonna go into details about how you might make this "bet" since there's more knowledgeable people here, but i will say that this is going to be -EV almost certainly because the people you're "betting" against know a lot more about this stuff than you do and will set your "odds" accordingly, and because it simply makes way more sense over such a long time frame to invest in a positive sum game rather than a neutral sum game.

[MrMore]

The fact that other people "know more than you" is irrelevant. The spread/market price will reflect what they know. You can, by definition, assume all conventional wisdom in the price, and, if you want, bet your unconventional view. If you're nothing more than a monkey throwing darts, you still won't underperform those "in the know."

[andrew484]

If you really want to make this bet, just open an online Forex account and go for it. Unfortunately, I think your expected payoff is extremely unlikely. Essentially you're saying you want to make $100,000 on a 10% rise on the yen but you only have $10k to trade with. That means you have to leverage your money 100 times. A 1% move against you would wipe you out! Taking a 'long-term' view of this is pointless. The only thing that matters with such high leverage would be the short-term.

[APXG]

fxy could be a possibility

[pig4bill]

The only way I know of to make a 10x return is futures options, and the premium will be so high that it would have to move a lot more than 10% to get that return.

[MrMore]

I've been looking at the forex firms, and they remind me somehow of offshore sportsbooks. Are they reliable, or can you recommend one that is? Are any bonded, regulated, etc?

[gull]

If you have to ask, please don't bet on currencies. Even if you didn't have to ask, still don't bet on currencies.

[DcifrThs]

[ QUOTE ]
i'm not gonna go into details about how you might make this "bet" since there's more knowledgeable people here, but i will say that this is going to be -EV almost certainly because the people you're "betting" against know a lot more about this stuff than you do and will set your "odds" accordingly, and because it simply makes way more sense over such a long time frame to invest in a positive sum game rather than a neutral sum game.

[/ QUOTE ]

first off, OP is willing to speculate and wants to make this bet.

for what it's worth, i agree with the conclusion. currency markets are the most profitable since actors in them do things that are not profit maximizing all the time. just because the price of the JPYvUSD is X doesn't mean that it is correctly priced by people "who know more" than you.

i put my signal at about +80% when the yen was at 123.18 a while ago (i think in the "trade ideas" thread i started). (i.e. i'd take about 80% of my maximum position going long in the yen vs. the dollar)

the yen is very likely undervalued vs. the dollar and i'd expect it to rise for a number of reasons.

regardless of those, two points are relavent here:

1) OP wants to gamble,
2) currency markets are the most inefficient and finding one of those spots is very profitable. (payoff profile of carry-trade investments is win win win ... win LOSE BIG, so betting against that has a payoff profile that is similar to a call option)

therefore, to OP, i have good news: you're pretty much at just the limit of what i think the notional value of a futures contract is, and can definitely take a position here since you don't even need the notional value to take on a position.

i.e. you can go to InteractiveBrokers.com and open an account. you can then execute a long yen futures order (and just roll it before every expiration) and keep the margin necessary in liquid funds there. i think you should obviously have far more than the margin since the bet can move up and down a lot but overall i don't think you actually need more than 3k for this bet (overnight margin=~2k).maybe 4 or 5k for safety...

enjoy,
Barron

[jimmysnow]

Out of the money midterm or longterm derivatives is what you are looking for. They are very similar in structure to sport futures. If you can beat sports betting you will do well with most forms of derivatives.