Is Annual 15% Riskless Return Possible?

B

Bobby T

Hello!

I'm fairly new to futures trading (and I've never traded in the FX spot market), but I recently came up with a trading idea that I wanted to run by the Elite Trader forum to see if someone can comment on the idea.

This strategy involves buying a currency (euro in this example) in the FX spot market, and immediately selling out a future to lock in the sales price today. The theoretical return is simply the risk free rate, but due to leveraged nature of these products, this "risk free return" also seems to be magnified. The system would note permit me to attach an excel spreadsheet, so please follow the link below to view the excel file for examples from different dates of how this strategy could be implemented.

https://www.dropbox.com/sh/tf9gn15s83wusvr/AADuarcNPR1AW6BvCWENWwmSa?dl=0

My questions on this strategy are as follows:
  • Are my calculations correct or are my margin requirement estimates off? If off, how much margin would I need to set aside to run this strategy?
  • What kind of management would be required to effectively implement this strategy?
  • At the end of the contract, would the short euro future settle and make you sell your long FX position (basically at the futures expiration, would the trade completely unwind itself naturally)?
Thank you and happy trading!

Bobby Roberts
 
Constant annual 15% returns will place you with the very best in the planet, assuming not a piker trading 5k.

Now, riskless, that one is for fictional characters.
 
Did you have a chance to review the excel document? I know what the margin requirement is to put on the trade right this second, but my real question is how much capital would I need to set aside to run this strategy? The amount of capital required could potentially greatly reduce the return.
 
Bobby T said:
Hello!

I'm fairly new to futures trading (and I've never traded in the FX spot market), but I recently came up with a trading idea that I wanted to run by the Elite Trader forum to see if someone can comment on the idea.

This strategy involves buying a currency (euro in this example) in the FX spot market, and immediately selling out a future to lock in the sales price today. The theoretical return is simply the risk free rate, but due to leveraged nature of these products, this "risk free return" also seems to be magnified. The system would note permit me to attach an excel spreadsheet, so please follow the link below to view the excel file for examples from different dates of how this strategy could be implemented.

https://www.dropbox.com/sh/tf9gn15s83wusvr/AADuarcNPR1AW6BvCWENWwmSa?dl=0

My questions on this strategy are as follows:
  • Are my calculations correct or are my margin requirement estimates off? If off, how much margin would I need to set aside to run this strategy?
  • What kind of management would be required to effectively implement this strategy?
  • At the end of the contract, would the short euro future settle and make you sell your long FX position (basically at the futures expiration, would the trade completely unwind itself naturally)?
Thank you and happy trading!

Bobby Roberts
More...

Your long a synthetic swap. No positive p&l. The value of the swap is equivalent to the interest rate differential. So if you are locking in positive basis on the swap, that means you will pay out the basis over the duration of the contract.
 
Is Annual 15% Riskless Return Possible?"

15% a year is very doable -- Heck, you can make that in a Day, if you trade the right stuff and have the appetite for it.
the word Riskless in the markets is laughable. :p

(...as for your specific strategy...Try it. that's your Best Teacher ;) ...not just some theoretical talk on a forum with strangers.)
 
All kidding aside, I believe there are very few IF any riskless activities. Maybe hft front-running or certain arbitrage plays have very limited risk.
 
Open a change-bank. Customer needs 50 singles from a $50 bill? No problem. Be prepared to do some maths. How do you make ur 15%? Volume.
 
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