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Yeah the futures are probably less costly than financing it through IB. I would say what you lose is the divisibility that you get when you trade the cash (as in the IB loan scenario), for example when you re-adjust your hedge you will have to do it in increments of£6,250 which is the contract...

No problemo. The loan case is really IB specific, so take a look at some of their materials on their site, look for "mechanics of an overseas trade" or something similar sounding. I think you might have been confused about my description of the loan since it was poor. You have the...

No the IB loan is equivalent to being short GBP/USD, sorry i meant to mention this in the previous post as well. But you still have the problem of having to adjust the size of the credit/loan. The only reason IB operates like this is because its the easiest way to deal in many products across...

Yes that's correct. For such a substantial move there will be overkill from the fact that your hedge will become increasingly too big. For example at the point when the stock value is £50, then your £65.3 hedge is too big, you would need to buy back £15.3. It is an even worse hedge when...

The adjustment there refers to the way that, say if your stock pays a dividend (in gbp) then you will have to adjust the hedge to include that as well if your position is substantial. Or more accurately, as the value of the stock fluctuates then the amount of gbp to be hedged will change. But...

No there is no difference, selling GBP/USD IS an adequate hedge irrespective of the fact that you are holding the stock (you might have to adjust it slightly, not worth it unless a large amount). You can separate the FX risk from the risk of holding the asset, that's the point. But it only...

Well they'll have offsetting balances from other customers with different base currencies, not to mention all the customers that trade through IBfx. In reality i think they'll have deposits in all of these currencies since they operate in those countries, so they're earning LIBOR+ on those...

I can only talk from my own experiences and i spent a while getting an IB representative to confirm it, but it might still be wrong. Also it could be totally irrelevant to other brokerages. Basically if you have a universal reg-T account at IB the base currency is the reporting currency and...

You've asked for 2 things in this thread: You mainly talk about wanting a foreign bolt-hole to serve as a backup facility if it no longer becomes possible to trade out of your location. But then in other posts you look at the lifestyle considerations, as if you were looking at general long...

Yes buying the collar on fx futures options would be one reasonable hedge for a natural long GBP position (so why did you ask?). But to get a good answer you need to specify 2 things: 1. Really you need to specify your account structure - when you purchased the stock did the broker/member...

Beautiful. Everyone everywhere is sub-human to someone else.

Cheers for everyone's help, that's thrown a lot more light on the matter. Does anyone know if Cottle's book is still available? I can only see an out of print one from 1996 on amazon (priced over £100 second hand!), and i can't seem to find 'hidden reality' anywhere.

A newbie question on the practical aspects of how one actually carries out options arbitrage from a flat book position, and without venturing into wilder strategies to make it possible. I'd be really grateful for any answers/referrals, i've been thinking about it for a while: Suppose a...