Futures currency / Spot currency spread trading

Out of curiousity. Assuming one was willing to accept the spread risk. One goes long that AUD/USD, and then takes the opposite side in a futures contract? So far, the risk is only the spread between the futures and spot, that is if it widens more than what can be collected in interest. Perhaps I'm missing something here, and I probably am. Could some one fill in where I'm wrong? :confused:
 
Quote from traderjb:

Out of curiousity. Assuming one was willing to accept the spread risk. One goes long that AUD/USD, and then takes the opposite side in a futures contract? So far, the risk is only the spread between the futures and spot, that is if it widens more than what can be collected in interest. Perhaps I'm missing something here, and I probably am. Could some one fill in where I'm wrong? :confused:
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I believe that is the only risk and with the currency spot and futures highly correlated, then i'm sure it is possible to do this spread trading.

Please pm if you want to work on this project with me. We could test all the different currency futures / spot.


I know people who do the spread trade between BHP , BLT LN and BHP US and very successful with this. Might you, their capital is alot more than what i can afford lol
 
Quote from smiley486:

No i have not looked at it yet. Is it a liquid market? Do you trade CME currency options? Where am I able to trade these?

I was looking into the spread trading of futures and spot currency.
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Checkout OpenEcry or TOS (TOS is still ramping up full support of FX options). Depends on the currency pair...Market Makers provide liquidity 24 hours a day. RTH have tighter spreads.

Trading costs and exchange fees are minimal but the spreads and option contracts are $$$. Trade them to hedge...

Standard option spreads are available through CME.
 

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What are you trying to archive? For an outright spot <-> futures arb you don't have the executional edge that you would need (you wouldnt ask if you had).

If you are trying to profit from a spot dealer that offers better than market rolls (some are), you can try, but with these volantile money markets its not a sure bet either. Last monday the future<->spot in eur/usd spread moved -50 pips due to USD o/n interest-rates going wild. You would also need huge positions to make it worthwhile, and the difference needs to be big enough (you eat the bid/ask spreads and commissions).
 
All right, I'll bite. I ran this through a paper account on TOS. Went long the AUD/USD @ .8353, shorted the December futures contract @.8296. with a spread of .0057 pips. The rational, lets just say one wanted to take advantage of the interest earned on 100,000 units over a week (7 days). According the calculator posted on this thread, the position should earn $71.62 for the period mentioned.

Initial Margin:

AUD future $2700
AUD spot $833
Total: $3533


I think, comparing interest earned to margin utilized that comes to about 2%.
 
I still think, that the risks posed in the spread could be greater than the interest one can earn (assuming those are the rates as well).
 
I guess what needs to be done is graphing the spread between the currency future and the currency spot. We can then look for peaks and troughs for a high probability spread trade.

How did you figure out 0.0057 was a good spread to enter?


Quote from traderjb:

All right, I'll bite. I ran this through a paper account on TOS. Went long the AUD/USD @ .8353, shorted the December futures contract @.8296. with a spread of .0057 pips. The rational, lets just say one wanted to take advantage of the interest earned on 100,000 units over a week (7 days). According the calculator posted on this thread, the position should earn $71.62 for the period mentioned.

Initial Margin:

AUD future $2700
AUD spot $833
Total: $3533


I think, comparing interest earned to margin utilized that comes to about 2%.
More...
 
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