What am I missing? New Turkish lira doesnt seem much more volitile than the rest of the currencies. 10k bucks in an account and short one 100k lot and collect 13% interest per month! How come everyone isnt doing it?
Carry Trade shorting USD/TRY 16%+ interest!?!
- Thread starter peilthetraveler
- Start date
Sorry, my math was off...looks more like 11.25% per month, not 13%
11.25% per month would be nice! It's actually around 13% per year and everyone is doing it, it's called the carry trade.
A 100k Short position Usd/Try on Oanda pays 15.75% pa on the TRY you're buying and charges 2.05% for the USD you're using to buy it. 15.75% minus 2.05% equals 13.7%. 100k @ 13.7% equals 13,700 per year, divided by 365 days equals $37.53 per 24 hours. Oanda's calculator is here.
Carry traders don't like market volatility and risk so they 'unwind' (cover) their Short positions at times like this. Any rallies are probably a selling opportunity when things quieten down a bit.
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You have currency risk as well, which can wipe you out.
In fact it is 11% return per month, because original post was about 10x leveraged account.
But what if Lira falls by 10% ? All the money will be lost.
He would actually have a 100k position though, and the risks associated with it, just because his deposit is leveraged doesn't make any difference.
Think of it like a mortgage, the % gain/loss is calculated as a percentage of house value rather than equity invested.