Futures currency / Spot currency spread trading

I didn't really. The chart on TOS showed that a spread between the AUD spot minus the futures actually jumped from around .0004 pips to .0093 and has been slowly ebbing back to zero.

<a href="http://www.flickr.com/photos/johnnyvenom/2887046292/" title="audspot minus aud futures by siliconjohnny, on Flickr"><img src="http://farm4.static.flickr.com/3206/2887046292_bfa612d589_b.jpg" width="1024" height="684" alt="audspot minus aud futures" /></a>
 
No really clear troughs and valleys.

Was there a futures expiry when it went to 0?

Do you think there is a viable method here for making money?




Quote from traderjb:

I didn't really. The chart on TOS showed that a spread between the AUD spot minus the futures actually jumped from around .0004 pips to .0093 and has been slowly ebbing back to zero.

<a href="http://www.flickr.com/photos/johnnyvenom/2887046292/" title="audspot minus aud futures by siliconjohnny, on Flickr"><img src="http://farm4.static.flickr.com/3206/2887046292_bfa612d589_b.jpg" width="1024" height="684" alt="audspot minus aud futures" /></a>
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Well, it's been a week, let's see how we've done. Now originally this was to be held for a whole seven days, but the FX side recieved a margin call and so I closed that out.

We opened the trade on 9/24/08 going long 100,000 units of AUD/USD @ .8305, and shorted one lot of AUD futures @ .8296

This morning I received a margin notice on the FX side, so I closed it out. Just as well, it had been 5 days, so that should be sufficient enough to see how a trade would last a "week."

So we closed out today, 9/29/08,
closed the AUD spot @ .8127, and the AUD futures @ .8079. The spot lost 178 pips, while the futures gained us 217 pips, for a net of 39 pips or $390. Interest earned, using the calculator provided in the link previously posted, on a position held shy of 5 days is about $48.50.

Now over the past couple days, I should note that despite their high correlation, one or the other often showed a loss/gain higher than the other. There is a risk that, if one were to do this to earn earn interest and hope that one position offsets the other, that interest earned will not be offset by a potential loss from positions. I guess one has to establish a spread chart between the two and take advantage of the trend that would best correspond to trying to earn interest.
 
It seems that the potential to make money from these trades certainly exists for retail traders, but seems limited unless you have a broker that offers the trade as a 'spread trade' rather than having to front up full margin for both legs.
 
By putting this on you are trading a swap. Be careful, forward points have been all over the place lately making this not as risk adverse as you might think.
 
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