Hongkong $$$ option risk/downside?

[bga4444]

On Squawk Box this a.m. Bill Akerman discussed Hongkong dollar PEG options. Thoughts on downside risk???

[bga4444]

If you buy a $1,000 Hongkong Dollar option Ackerman says it controls $200,000 Hongkong Dollars. What is the potential risk?
I have never traded currency. Is there a "hidden" down side?

[rovo]

I'm not much on currency plays but if the play is a normal option, then the risk is your investment. Straight option plays are fun but extremely risky. Just substitute the word "derivative" for "option" to get the proper perspective.

[rovo]

William Ackman, founder of hedge fund Pershing Square Capital Management, placed a bet that would benefit if Hong Kong decides to remove its peg against the U.S. dollar, reports Katherine Burton for Bloomberg.

Ackman is purchasing Hong Kong dollar call options. He believes that the best way for the government to allow the currency to appreciate would be to shift the peg to HK$6 against the U.S dollar, or a 30% rise, and then switch the link to the Chinese yuan over three to six years.

seekingalpha.com/article/293996-hong-kong-etf-post-gains-on-currency-peg-speculation

[rovo]

There is a very nicely written thread on the IBB Board about basic options.

notmsnmoney.proboards.com/index.cgi board=startinvesting&action=display&thread=12524

One shouldn't consider playing with options unless you have at least basic knowledge of the risks involved.

[bga4444]

Thanks Rovo I will check it out.