How do I hedge?

J

jim.thornton

I'm a Canadian trader but my account is in all USD. I would like to greatly reduce/eliminate my currency risk to USD. Right now if the USD goes down or CAD goes up faster I'm going to get killed. I would like to be able to hedge this risk, but other than buying UDN I can't think of anything that would be effective (since I cannot and don't want to trade forex).

Does anyone have any ideas? I don't care as much about lost profits if the USD outperforms CAD. I'm just more concerned with hedging the risk so that I get my returns irrespective of currency.

Is someone does have a suggestion, can you please word in a way that is for every $5,000 or $10,000 in USD risk, you can hedge with ______ to offset the risk.
 
Other than Currency options, there is FXC which is an ETF based on Canadian currency, which I am long in futures and currency. I have accounts when my system says to short USD, I find currencies that are near 9 year lows and exchange USD into 3 other currencies, some have no exchanges I can trade and other do so I can continue to trade their instruments without constant exchanging rate monies as that account is totally a different currency than the USD, so I can profit like you are doing but unlike you, I would not trade instruments in a currency I expect to be too high, but we all have our methods and I am often off by a couple years, but overall I have done well on currency making increase on USD and trading of their instruments.
 
xandman said:
You can buy M6C futures or forex mini-lots in a sub-account. Make room for the potential margin adjustments.
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I've been wanting to stay away from futures and forex because my understanding is that if things go against you, you can actually owe more than you started with.
 
Handle123 said:
Other than Currency options, there is FXC which is an ETF based on Canadian currency, which I am long in futures and currency. I have accounts when my system says to short USD, I find currencies that are near 9 year lows and exchange USD into 3 other currencies, some have no exchanges I can trade and other do so I can continue to trade their instruments without constant exchanging rate monies as that account is totally a different currency than the USD, so I can profit like you are doing but unlike you, I would not trade instruments in a currency I expect to be too high, but we all have our methods and I am often off by a couple years, but overall I have done well on currency making increase on USD and trading of their instruments.
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I'm not fully following you. Is there not an etf i can use that will allow me to continue to trade US securities but remove the currency risk?
 
jim.thornton said:
I've been wanting to stay away from futures and forex because my understanding is that if things go against you, you can actually owe more than you started with.
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A wise and prudent choice. However, significant leverage is what makes it work. To hedge 100% on a cash basis would incapacitate your trading capital 100%.

This leaves you to choose between the associated costs of long only options trades or free-balling.
 
Handle123 said:
Only way to remover currency risk will be currency options or ETFs like FXC
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So lets say i have a 10k USD account invested in ITM long term options. . How do i figure out what my currency risk is? The specific trade can i make to offset it?
 
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