Cost of Carry in FX Futures vs. Swap in Forex

heispark

heispark

As a swing trader, I thought the biggest advantage trading currency Futures compared to Forex is cheaper trading cost, because Forex charges high swap rate (when it's negative swap). However, up until now, I didn't know about 'cost of carry' in FX Futures. (More details: https://www.cmegroup.com/education/...portance-of-fx-futures-pricing-and-basis.html).
My quick question: Considering the cost of carry, is mid/long term trading cost in FX Futures still much cheaper than Forex? (ex. Buying/holding E6 cheaper than buying/holding EURUSD?)
Thanks.
 
Transaction cost in fx futures have never been cheaper than cash fx. At least not with reputable fx brokers that only pass through liquidity and charge commission without any markups or alteration of the price feeds.

Carry is built into fx futures so there is zero benefit in that regards of trading fx futures. My analysis has shown, and I trade around 400mln-1bln in usd notional per month in cash fx, that for me overall cost of execution are lower via cash than futures. But then again the cost comparison depends on a lot of different variables such as how specifically you execute in size should you trade larger volume.

In fact you may be exposed to additional risk trading the futures each time you trade the rolls.

In addition, only a few fx pairs are offered via futures whereas in cash you can trade close to 120 pairs.

heispark said:
As a swing trader, I thought the biggest advantage trading currency Futures compared to Forex is cheaper trading cost, because Forex charges high swap rate (when it's negative swap). However, up until now, I didn't know about 'cost of carry' in FX Futures. (More details: https://www.cmegroup.com/education/...portance-of-fx-futures-pricing-and-basis.html).
My quick question: Considering the cost of carry, is mid/long term trading cost in FX Futures still much cheaper than Forex? (ex. Buying/holding E6 cheaper than buying/holding EURUSD?)
Thanks.
More...
 
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Your statement is only valid for brokers who take a cut off rolls. Otherwise there is zero benefit of trading fx futures over cash in this specific regard.

traider said:
Yes usually for most brokers. If you have +ve carry use futures for periods > 1 day.
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GRULSTMRNN said:
Transaction cost in fx futures have never been cheaper than cash fx. At least not with reputable fx brokers that only pass through liquidity and charge commission without any markups or alteration of the price feeds.

Carry is built into fx futures so there is zero benefit in that regards of trading fx futures. My analysis has shown, and I trade around 400mln-1bln in usd notional per month in cash fx, that for me overall cost of execution are lower via cash than futures. But then again the cost comparison depends on a lot of different variables such as how specifically you execute in size should you trade larger volume.

In fact you may be exposed to additional risk trading the futures each time you trade the rolls.
More...
Thank you very much for your quick feedback. It answered my question. :thumbsup:
I have better edge on currency trade and now I am going back to Forex.....
 
Logically it doesn't make sense. Futures mimic spot by definition. The only difference is if your spot FX bucket shop is too greedy and rips you off more than average FX cost of carry really is.
 
CFerret said:
Logically it doesn't make sense. Futures mimic spot by definition. The only difference is if your spot FX bucket shop is too greedy and rips you off more than average FX cost of carry really is.
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My Forex broker is Dukascopy and hopefully they are fair and not too greedy in charging the cost..... :rolleyes:
My conclusion is if I have better edge on currency trade, I will be better off with Forex instead of Futures...... (I am a swing trader and often trade cross pairs)
 
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Dukascopy have pretty tight spreads. Not the best in terms of liquidity but if you don't trade in large size dukascopy is a pretty good fx broker.

heispark said:
My Forex broker is Dukascopy and hopefully they are fair and not too greedy in charing the cost..... :rolleyes:
My conclusion is if I have better edge on currency trade, I better off go to Forex instead of Futures......
More...
 
heispark said:
My Forex broker is Dukascopy and hopefully they are fair and not too greedy in charing the cost..... :rolleyes:
My conclusion is if I have better edge on currency trade, I will be better off with Forex instead of Futures...... (I am a swing trader and often trade cross pairs)
More...
Yes. I speculate intetmediate-term (weeks to months) too and prefer spot FX over futures, especially on crosses. Simply no liquidity elsewhere.
 
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