simple. Buy Crude Oil. Crude is pegged to the USD hence inversely correlated. Exit the trade when the peg is removed. As a Canadian trader you should have your account denominated in CAD. Otherwise get another broker who is able to do that.
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How to hedge the $USD?
- Thread starter drukes1234
- Start date
simple. Buy Crude Oil. Crude is pegged to the USD hence inversely correlated. Exit the trade when the peg is removed. As a Canadian trader you should have your account denominated in CAD. Otherwise get another broker who is able to do that.
I called Interactive Brokers and they say I'm being charged 6% for my USD short... now this makes no sense for my hedge if I'm paying 6% a month on 40k
You are charged the ANNUAL INTEREST rate differential between the currency you're short and the one you're long. I am not sure what the carry is between CAD and USD but I doubt it's not 6% annually and definitely not MONTHLY!Quote from drukes1234:
I called Interactive Brokers and they say I'm being charged 6% for my USD short... now this makes no sense for my hedge if I'm paying 6% a month on 40k
Of course, it can also mean you could receive interest depending on the carry.
6% sounds about right for 1 year out USD puts 1 year out. But not for Forex spot long/short hedging. Did they quote you option prices?
I called IB again and they said they charge 6% per year for the USD short... the hedge doesn't make much sense if I'm already 6% in the hole
I still don't get how this hedge will work if I'm spending 6% a year on interest
Quote from drukes1234:
I'm a Canadian trader who trades US equities and I'm just getting killed daily with the fall of the $USD. Assuming I have $200k open positions denominated in US dollars, every day the USD drops 1% compared to the CAD (which seems like almost every day now) I lose $2000. Is there any way I can hedge this?
If you are a daytrader or short-term trader, then just sell your USD for CAD. If you need USD in your account for some reason (e.g. you hold US stocks long-term) then use the CAD futures on the CME to hedge your exposure.
After that, just make sure to convert your profits whenever they reach like $10k.