long USDHKD with IB

Quote from luisHK:

It sure adds up in that case. I'm not keen on opening a separate acount only for forex as I trade little forex and enjoy the multiplatform IB offers, but is a broker like Oanda cheaper for forex carry trades ? Or rather are there other multiproduct brokers offering better conditions on such trades ( i'm pretty keen on investing part of my trading funds with another broker than IB, but the more products it would offer the better, particulary in terms of international markets )
More...

I do not have an account with Oanda but they have a swap rate calculator on their pages and yes they are quite a bit more viable for carry trades than IB according to the cases I have tested. Some people do use them for carry trades. They also have more exotic currencies such as non-deliverable INR (Indian rupee).

I think that some of the European FX brokers and banks are cheaper still if you can get on their best price tier (but most will not accept most U.S. clients), and even TradeStation seemed better for forex swap rates (but not for stock and futures costs and they have a limited list of currencies).

There is not enough of a market in carry trades for most retail brokers to care about being competitive in it, I think. One may have to wait until one is dealing at the institutional / prime brokerage level but I am not there yet.

For pairs where there are currency futures, those are priced fine for carry trades. Forwards look better too because you pay/receive the carry just once in a single fee up front there also and it is more reasonable.

Most retail multiproduct brokers require a separate forex account so they are not a help that I have found.
 
Thanks Comintel.

i've checked the below link with oanda and it doesn't sound right, as the carry is alway earning interest to the trader no matter wether he's long or short the same pair?!?

http://fxtrade.oanda.com/analysis/interest-calculator

As of currency futures, are you familiar with EURCHF ones ? I take some short terms positions on eurchf but at the current rates I'd like to hold some over a longer period - I checked quickly a couple of CHF futures last week and they showed a much wider spread than spot forex, and read on this forum that liquidity is an issue at the moment (on USDCHF futures)
 
Quote from luisHK:

Thanks Comintel.

i've checked the below link with oanda and it doesn't sound right, as the carry is alway earning interest to the trader no matter wether he's long or short the same pair?!?

http://fxtrade.oanda.com/analysis/interest-calculator

As of currency futures, are you familiar with EURCHF ones ? I take some short terms positions on eurchf but at the current rates I'd like to hold some over a longer period - I checked quickly a couple of CHF futures last week and they showed a much wider spread than spot forex, and read on this forum that liquidity is an issue at the moment (on USDCHF futures)
More...

With the Oanda drop-down set to balances, I see what you mean. But if you set it to Trades, it makes more sense. These are not the same thing at Oanda as they are at IB. I think it just reflects their internal demand and supply for various currencies at Oanda. Everything is dynamic and computed there so you get temporary anomalies.

I have traded EURCHF futures but not recently. Probably the wider spreads reflect the great uncertainties as to the future of the Euro and Swiss Franc.

Right now there is a ceiling/floor set by the SNB, but there are speculative assaults etc.

Bid and ask spread does not necessarily tell the whole story - you should still be able to get fills in between.
 
Quote from comintel:

With the Oanda drop-down set to balances, I see what you mean. But if you set it to Trades, it makes more sense. These are not the same thing at Oanda as they are at IB.
More...

Indeed, it works better set to "trade", Thanks !

It appears EURCHF has a positive carry with Oanda, even with smaller amounts, quite a bit better that IB. USDHKD is better below 1-2 million USD position . Usually good enough for me but if the USDHKD almost touching 7.75 I would leverage a bit more - if the carry cost was insignificant. I would definetely take a bigger position on eurchf if it comes back to 1.202.

Below is a weekly chart for RF March 12 - very little volume and nothing whatsoever on more distant contracts. Am I missing a more active contract ?
 

Attachments

Quote from luisHK:

Indeed, it works better set to "trade", Thanks !

It appears EURCHF has a positive carry with Oanda, even with smaller amounts, quite a bit better that IB. USDHKD is better below 1-2 million USD position . Usually good enough for me but if the USDHKD almost touching 7.75 I would leverage a bit more - if the carry cost was insignificant. I would definetely take a bigger position on eurchf if it comes back to 1.202.

Below is a weekly chart for RF March 12 - very little volume and nothing whatsoever on more distant contracts. Am I missing a more active contract ?
More...

You are not missing a more active contract.

But looking at the slightly wider bid ask spread on RF, it is still a tiny fraction of what you would give up in carrying costs for a cash forex position if you held the position for a long time.

The future is a derivative of the spot (actually the forward) market and will always be slightly less liquid but it does not really matter for a longer term trade in my opinion.

The futures price will never deviate much from the spot/forward price (except to reflect interest rate differentials) because obviously the two are actively arbitraged.

Volume really is unimportant in this case because the liquidity is not dependent on volume - it is dependent on the ready arbitrage against the spot/forward interbank market. RF is liquid enough for long term trades in my opinion.
 
Thanks again for your input Comintel.

I've started buying 2 RFs this morning and will probably switch most of my EURCHF position to this RF as well as adding if it keeps going down. The spread and the discount to the spot forex (bought at 8 and 8.5 pips discount) is moving, so it's worth following it closely before entering, but it does indeed look better than IB carry rates.
 
If I was 100% sure I would go all long (with a better carry opportunity). In HK there has been talk for a while about the reevaluation of the peg but it's lasted through pretty tough times. Anyway through IB I don't see any interesting way to enter this trade and am still neutral on this pair (I have only 1300HKD cash on my account, not enough to bother without margin :eek: )
 
Quote from luisHK:

Thanks again for your input Comintel.

I've started buying 2 RFs this morning and will probably switch most of my EURCHF position to this RF as well as adding if it keeps going down. The spread and the discount to the spot forex (bought at 8 and 8.5 pips discount) is moving, so it's worth following it closely before entering, but it does indeed look better than IB carry rates.
More...

The bid ask spread on RF is down to 2 (sometimes 3) pips right now as we are in prime business hours in Europe.
 
Spreads were indeed better during the European market hours, but I got some decent fills later as well - yet it is pretty boring (and disturbing other activities) to wait so long for tighter spread.

Do you or anyone has any input on how to make the process easier ? I opened a thread on the topic :

http://www.elitetrader.com/vb/showthread.php?threadid=235680

Besides am I right that the discount between the futures and the spot rate is a compensation for the positive carry on EURUSD ? It's a nice option to not only avoid the interest charge on forex with IB but also to benefit of the positive carry- will definetely look further into currency futures (USDJPY is next - I closed at least half my position the friday evening before the last BOJ intervention because I didn't want to keep on paying the carry. JPY contract could have avoided that unfortunate initiative.
 
You must log in or register to reply here.
Back
Top