So do I pay "margin interest" or anything for Forex leverage?

S

Saltynuts

This new spending bill that passed apparently has a TON of pork in it. I'm convinced the dollar printing will only get worse and decline versus other countries that aren't going nuts with the printing press. I'm talking REAL long term here, I know day to day and even month to month different considerations can apply. But I'm in it for the long haul.

So my question is basically this. If I open a Oanda account and by some Swiss Francs, for example, using just 1 to 1 leverage, and the Francs really do appreciate versus the dollar, I don't think I've made very much, sometimes not anything, if the appreciation just takes into account the higher U.S. inflation due to printing the dollars, because I convert my Francs back into dollars but now those dollars are worth less due to the inflation. So I am better off then if I had not bought the Francs but kept my money in dollars, but I'm not really at a "gain" versus my starting position - I've just managed to mitigate the effect of U.S. inflation.

So, to really "gain" I think I need to use leverage. 2 to 1 or 3 to 1 or more. How high can I go? Is it a max 50 to 1 for any U.S. person/accounts? I think that is much more than I would need. But what do I pay for this leverage? Is there some kind of fee or something akin to "margin interest" for stocks?

Thanks!!!
 
Shorting the USDCHF is the one of the more costly positions to hold since the swissy has a negative interest rate now.

Would cost about $5.42 per day for 1 lot (approx. $100,000).
A 1 pip move is approx. $10.50 at current prices.
Price would need to drop approx. 2 of those "$1000" blocks in a year to cover the financing costs.
https://www.oanda.com/us-en/trading/financing-fees/

***Corrected chart & calculations :-)

CB rates.png


Swap.Oanda.png

USDCHFWeekly.png
 
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Saltynuts said:
This new spending bill that passed apparently has a TON of pork in it. I'm convinced the dollar printing will only get worse and decline versus other countries that aren't going nuts with the printing press. I'm talking REAL long term here, I know day to day and even month to month different considerations can apply. But I'm in it for the long haul.

So my question is basically this. If I open a Oanda account and by some Swiss Francs, for example, using just 1 to 1 leverage, and the Francs really do appreciate versus the dollar, I don't think I've made very much, sometimes not anything, if the appreciation just takes into account the higher U.S. inflation due to printing the dollars, because I convert my Francs back into dollars but now those dollars are worth less due to the inflation. So I am better off then if I had not bought the Francs but kept my money in dollars, but I'm not really at a "gain" versus my starting position - I've just managed to mitigate the effect of U.S. inflation.

So, to really "gain" I think I need to use leverage. 2 to 1 or 3 to 1 or more. How high can I go? Is it a max 50 to 1 for any U.S. person/accounts? I think that is much more than I would need. But what do I pay for this leverage? Is there some kind of fee or something akin to "margin interest" for stocks?

Thanks!!!
More...


How can you not know this?

Dealers do not charge a margin loan. They make their money as MMers. 1) the spread received (gross) which is matched internally directly and via triangular arbitrage. When a threshold is reached they will give-up (hedge) in the futures markets. 2) Swap rates; the IR differential is another source of revenue as they can finance better than retail.

#IRR
 
Saltynuts said:
This new spending bill that passed apparently has a TON of pork in it. I'm convinced the dollar printing will only get worse and decline versus other countries that aren't going nuts with the printing press. I'm talking REAL long term here, I know day to day and even month to month different considerations can apply. But I'm in it for the long haul.

So my question is basically this. If I open a Oanda account and by some Swiss Francs, for example, using just 1 to 1 leverage, and the Francs really do appreciate versus the dollar, I don't think I've made very much, sometimes not anything, if the appreciation just takes into account the higher U.S. inflation due to printing the dollars, because I convert my Francs back into dollars but now those dollars are worth less due to the inflation. So I am better off then if I had not bought the Francs but kept my money in dollars, but I'm not really at a "gain" versus my starting position - I've just managed to mitigate the effect of U.S. inflation.

So, to really "gain" I think I need to use leverage. 2 to 1 or 3 to 1 or more. How high can I go? Is it a max 50 to 1 for any U.S. person/accounts? I think that is much more than I would need. But what do I pay for this leverage? Is there some kind of fee or something akin to "margin interest" for stocks?

Thanks!!!
More...
Another way to look at this....what about the Swiss funding bill that passed this year that had even MORE pork in it?

Just a thought experiment, I actually don't know much if anything about the Swiss budget. But the point is that everything is relative with currencies. If everyone is subject to the same shock, in this case COVID, and everyone responds in a similar way monetarily, then you wouldn't expect any currency to change with respect to the other based on the money printing. So before you make that bet based on what you know about the U.S. situation (probably relatively a lot) you also want to know at least a decent about about the other half of the bet (maybe relatively a lot less?).
 
So oanda applies a 100% profit margin on funding cost. Lol. Thats why I trade through reputable fx brokers such as IB.

BKR88 said:
Shorting the USDCHF is the one of the more costly positions to hold since the swissy has a negative interest rate now.

Would cost about $5.42 per day for 1 lot (approx. $100,000).
A 1 pip move is approx. $10.50 at current prices.
Price would need to drop approx. 2 of those "$1000" blocks in a year to cover the financing costs.
https://www.oanda.com/us-en/trading/financing-fees/

***Corrected chart & calculations :)

View attachment 254736

View attachment 254737
View attachment 254739
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Retail fx clients NEVER face dealers. They face brokers or ECNs that pass through fair market spreads (if not marked up), are charged commission and funding costs. How dealers hedge their exposure is irrelevant to retail clients. Of course is there a linkage but it's not direct. The concept of triangular arbitrage in fx markets is completely outdated. I say that because I algorithmically made markets for one of the world's largest fx market participants years ago and we either warehoused exposure or laid it off in the market. Ideally we would cross client orders but that almost never happens without warehousing, at least not in size.

destriero said:
How can you not know this?

Dealers do not charge a margin loan. They make their money as MMers. 1) the spread received (gross) which is matched internally directly and via triangular arbitrage. When a threshold is reached they will give-up (hedge) in the futures markets. 2) Swap rates; the IR differential is another source of revenue as they can finance better than retail.

#IRR
More...
 
If Phoenix rises from the ashes yes but that is a big if. The world has changed. Who raises rates first end of this year or next year is a big question that is definitely not yet settled.

longandshort said:
I think you're in for a big surprise if you bet against the dollar at the moment.
More...
 
DiceAreCast said:
If Phoenix rises from the ashes yes but that is a big if. The world has changed. Who raises rates first end of this year or next year is a big question that is definitely not yet settled.
More...
UST is already rising well ahead of peers...And with the Euro zone's botched vaccine rollout, I don't see them competing with US on the growth front (and by proxy, rates) for some time unless they make a policy mistake (which is what Lagarde did from Dec-Feb).
 
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