Does anybody have experience with what IB's forex charges to hold overnight positions? The overnight swap with my broker is two full pips at times. On top of the spread. What is the rate per 100k at IB for overnight holding cost? Anybody know?
Overnight Swap cost
- Thread starter Big Game Hunter
- Start date
which currency pair
GBP/USD and EUR/USD
2 pips... yeah, you are definitely being screwed. Which dealer?
Typical retail overnight swap rates, in pips, should range from around -0.68 (long EUR/USD) to +0.36 (short EUR/USD), and from -0.12 (long GBP/USD) to -0.29 (short GBP/USD).
IB's tiered rate tables are on their website, under Fees - Interest & Financing.
Typical retail overnight swap rates, in pips, should range from around -0.68 (long EUR/USD) to +0.36 (short EUR/USD), and from -0.12 (long GBP/USD) to -0.29 (short GBP/USD).
IB's tiered rate tables are on their website, under Fees - Interest & Financing.
Yes, 2 full points seems excessive even though I am not clued up on the world of retail FX. Can't believe this is what they charge for an overnight swap in the Euro and cable when they probably get competitive rates from their clearer.
That was my reaction at first too but upon further research and with help from several others on this forum, I now agree that IB seems to be better than market standard for retail spot forex in this area.
But my initial disgruntlement turned to joyous embrace as I've actually had difficulty finding another legit shop with better rollover debits/credits.
The risk undertaken is low, but the market hasn't reached a level of competitiveness to improve the rollover debits/credits yet -- Liquidity permitting, one can always the derivatives route where there really isn't any haircut bec you're dealing with a counterparty who could just as easily be you.
Hello Forex old hands
At IB if I short JYM7 & buy spot forex USD/JPY ,will the +ve "short yen" carry interest will be more than the (futures-spot loss) at the the end of June contract?
Today
yen cash: 0.8422
JYM7: 0.8485.
Also instead of long yen & pay the debit interest, does long calls worth the trouble speculatively?
As of today June calls (expire on 5th june)
0.8500-89 pips
0.8550-69 pips
0.8600-54 pips
Any other strategy to get overnight interest fully hedged?
(no free lunch exists I suppose!)
thanks
At IB if I short JYM7 & buy spot forex USD/JPY ,will the +ve "short yen" carry interest will be more than the (futures-spot loss) at the the end of June contract?
Today
yen cash: 0.8422
JYM7: 0.8485.
Also instead of long yen & pay the debit interest, does long calls worth the trouble speculatively?
As of today June calls (expire on 5th june)
0.8500-89 pips
0.8550-69 pips
0.8600-54 pips
Any other strategy to get overnight interest fully hedged?
(no free lunch exists I suppose!)
thanks
krishiyer,
i think you mean short the future and short the USD pair - otherwise its a "texas hedge"
no its negative carry.
if you trade cash market fx then your interest earned v interest paid will ALWAYS be worse than the future. why? because the futures exchanges have theoretically no counterparty risk/extra funding cost, ie the FX forwards (futures) should be priced around spot + net libor interest. So in your case you are earning on the short the future:
earning ~5.25%-0.50% interest
but
paying on your IB fx cash position (short USD, long JPY) ~(5.25%+IB spread) - (0.50%-IB spread)
currently this all nets out to about:
earning 4.75%
but
paying 5.25%+0.25% - 0.50% + 0.25% = 5.25%
assuming libors of 5.25 and 0.50
likewise if you were long both sides:
paying on future: 4.75%
earning on cash fx: 5.25%-0.25% - (0.50% + 0.25%) = 4.25%
you should always trade the future instead of cash other things being equal (unless you are bank or other highly rated institution).
trading the options doesn't help with this problem and should only be considered as a directional/volatility play.
i think you mean short the future and short the USD pair - otherwise its a "texas hedge"
no its negative carry.
if you trade cash market fx then your interest earned v interest paid will ALWAYS be worse than the future. why? because the futures exchanges have theoretically no counterparty risk/extra funding cost, ie the FX forwards (futures) should be priced around spot + net libor interest. So in your case you are earning on the short the future:
earning ~5.25%-0.50% interest
but
paying on your IB fx cash position (short USD, long JPY) ~(5.25%+IB spread) - (0.50%-IB spread)
currently this all nets out to about:
earning 4.75%
but
paying 5.25%+0.25% - 0.50% + 0.25% = 5.25%
assuming libors of 5.25 and 0.50
likewise if you were long both sides:
paying on future: 4.75%
earning on cash fx: 5.25%-0.25% - (0.50% + 0.25%) = 4.25%
you should always trade the future instead of cash other things being equal (unless you are bank or other highly rated institution).
trading the options doesn't help with this problem and should only be considered as a directional/volatility play.
It's a shame for the trader as trading currency pairs with large interest rate differentials can be quite costly then. Probably a much better idea to trade the future.