There appear to be a few logistical hurdles in trading both US and foreign futures intraday in a USD denominated IB universal account. I'm trying to figure out the best way to do this, and would appeciate any advice from the many whove been down this road. These appear to be my options:
A. Split up my capital, and open a second IB account in the foreign currency. Pay the currency conversion fee only when funding the account and making infrequent withdrawals. Take on long term exchange rate risk between time of funding and time of withdrawals.
B. Trade the foreign future in the USD account, and pay conversion fees on every trade (or are they daily?), taking on more overhead, but likewise limiting exposure to major exchange rate fluctuations that could happen over the lifetime of the account.
Either way, without hedging the exchange risk, it looks like there is some potentially significant exposure there, how do smaller traders protect against this? Also, when making currency conversions, what speads would I be dealing with in addition to fees posted in the commission section of the IB website, and where could I see the precise exchange rates/spreads used, and their price history. I thought it would be like a USDXXX cross rate, but this aparently isnt right. Also, per contract commissions are higher on some foreign markets.
Am I making this out to be a bigger issue than it is, it seems between foreign exchange risk, associated spreads and fees, higher commissions, and segmented account capital, the overhead and exchange risk could add up and be potentially unpredictable. On the other hand, adding a foreign market with non-overlapping hours presents the opportunity to exchange free time for either more income, less risk or both. Any guidance from others on these concerns?
Thanks
A. Split up my capital, and open a second IB account in the foreign currency. Pay the currency conversion fee only when funding the account and making infrequent withdrawals. Take on long term exchange rate risk between time of funding and time of withdrawals.
B. Trade the foreign future in the USD account, and pay conversion fees on every trade (or are they daily?), taking on more overhead, but likewise limiting exposure to major exchange rate fluctuations that could happen over the lifetime of the account.
Either way, without hedging the exchange risk, it looks like there is some potentially significant exposure there, how do smaller traders protect against this? Also, when making currency conversions, what speads would I be dealing with in addition to fees posted in the commission section of the IB website, and where could I see the precise exchange rates/spreads used, and their price history. I thought it would be like a USDXXX cross rate, but this aparently isnt right. Also, per contract commissions are higher on some foreign markets.
Am I making this out to be a bigger issue than it is, it seems between foreign exchange risk, associated spreads and fees, higher commissions, and segmented account capital, the overhead and exchange risk could add up and be potentially unpredictable. On the other hand, adding a foreign market with non-overlapping hours presents the opportunity to exchange free time for either more income, less risk or both. Any guidance from others on these concerns?
Thanks
