ID TWS question - what should I click for this message ?

T

traderwald

Hi guys,

I got this message on the IB TWS. Do you happen to know what option I should choose ?

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- (to be considered)

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I have not opened a Fxtrade. This is for a US market position that I have opened

Thank you
 
nooby_mcnoob said:
How do you think ib will make a USD purchase when your base currency is not USD? They convert it.

In your case, choose FXCONV as that is what you're doing
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Do they do the currency conversion at market price?

I think this would mean that the currency trade will also be part of the total P/L is that correct ? I was not aware of that ! I thought since it is not an actual fx trade, they would simply apply same conversion rate on both directions of the trade such that it would not impact the P/L when I do not actually trade FX but trade other tickers such as ES or something.
 
etrades said:
Do they do the currency conversion at market price?

I think this would mean that the currency trade will also be part of the total P/L is that correct ? I was not aware of that ! I thought since it is not an actual fx trade, they would simply apply same conversion rate on both directions of the trade such that it would not impact the P/L when I do not actually trade FX but trade other tickers such as ES or something.
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That would transfer the risk to the broker which they won't do. Yes, when you buy stock in a different currency, you also have FX risk.
 
nooby_mcnoob said:
That would transfer the risk to the broker which they won't do. Yes, when you buy stock in a different currency, you also have FX risk.
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Thank you nooby_mcnoob.

Is there a way to convert once to USD and then keep it in that currency in the trading account even so it does not convert for every trade ?

What is a better approach ? to convert for every trade or to leave the currency risk on the account and trade in USD itself for all trades ?

(also not sure if the commission is applicable for these conversions if we convert for each trade that is done on it)
 
etrades said:
Thank you nooby_mcnoob.

Is there a way to convert once to USD and then keep it in that currency in the trading account even so it does not convert for every trade ?

What is a better approach ? to convert for every trade or to leave the currency risk on the account and trade in USD itself for all trades ?

(also not sure if the commission is applicable for these conversions if we convert for each trade that is done on it)
More...

I keep multiple currency balances for each market I'm interested in but only what I need. I sweep over to USD regularly.
 
etrades said:
Thank you nooby_mcnoob.

Is there a way to convert once to USD and then keep it in that currency in the trading account even so it does not convert for every trade ?

What is a better approach ? to convert for every trade or to leave the currency risk on the account and trade in USD itself for all trades ?

(also not sure if the commission is applicable for these conversions if we convert for each trade that is done on it)
More...
Your IB account is a multi-currency account. Suppose your account is in EUR and you have placed EUR cash in your account to trade European stock. Then you decide that you want to buy some US stock, which is obviously being traded in USD. IB allows you to open your first US trade and your account will now show both a EUR cash position and a USD cash position. Your USD cash position is negative because you have used USD to buy the US stock. In fact: you are borrowing this USD cash from IB. You will see both cash positions in TWS listed separately. Your EUR cash position is not affected by this USD trade. If you don't want this negative USD cash position you have to place an FX order to buy USD, using some of your EUR.
If you don't buy a US stock but a US futures contract the story is similar but different. The commission for the contract is charged in USD, but this is only a small amount (e.g. 1~2 USD). However, in order to keep this position you need an overnight maintenance margin, which is charged in USD. IB puts up this maintenance margin for you and charges it back to you. This, however, does not show up as a negative USD cash position! You won't see this displayed margin requirement in TWS. You will see this in your monthly statement, as there it is mentioned that you had a negative USD position and that IB charged your debit interest over this USD position. Your monthly statement will display an overview of each of the currencies that you hold in your account. Plus a combined overview in the so-called BASE currency (probably EUR in your case).
 
HobbyTrading said:
Your IB account is a multi-currency account. Suppose your account is in EUR and you have placed EUR cash in your account to trade European stock. Then you decide that you want to buy some US stock, which is obviously being traded in USD. IB allows you to open your first US trade and your account will now show both a EUR cash position and a USD cash position. Your USD cash position is negative because you have used USD to buy the US stock. In fact: you are borrowing this USD cash from IB. You will see both cash positions in TWS listed separately. Your EUR cash position is not affected by this USD trade. If you don't want this negative USD cash position you have to place an FX order to buy USD, using some of your EUR.
If you don't buy a US stock but a US futures contract the story is similar but different. The commission for the contract is charged in USD, but this is only a small amount (e.g. 1~2 USD). However, in order to keep this position you need an overnight maintenance margin, which is charged in USD. IB puts up this maintenance margin for you and charges it back to you. This, however, does not show up as a negative USD cash position! You won't see this displayed margin requirement in TWS. You will see this in your monthly statement, as there it is mentioned that you had a negative USD position and that IB charged your debit interest over this USD position. Your monthly statement will display an overview of each of the currencies that you hold in your account. Plus a combined overview in the so-called BASE currency (probably EUR in your case).
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Thank you Hobby Trading !

What is the interest rate that IB would charge for the USD position ?

I guess most prefer not to do a USD/OTH CURRENCY Fx trade in order to buy USD market entities given they would need to again look how that currency pair is doing !! One would rather concentrate on their primary trade (may be ES futs contract or something) rather than focus on a currency trade on the side. Is that correct ?


Overall which is a better option ? is it to convert the currency to USD or is it pay the interest rate that is charged by IB for this ? (As mentioned above, my preference is to pay the interest rate rather than do an FX trade as I would rather concentrate on the main trade rather than the fx trade, but not sure if this is the correct preference? )
 
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