Swap arbitrage with Islamic account?

[pipeguy]

Anybody knows is it makes sense to earn swaps on swap-free accounts trading on USDRUB or USDZAR. What are the pitfalls there?
My broker Tickmill offers swap free account for free, so I need to find second broker which also offers swap free account and have decent margin to open opposite positions on both. Spreads is the only cost then, the more I keep position open the more I earn.
What is your view on that?

 

[Pippi436]

The pitfall is that its most likely not working, since they can kick you out at any time and/or charge the swaps afterwards if they determine you are abusing this. Read the T&C. They are certainly not going to pay for your free lunch..

 

[Sig]

The pitfall is that its most likely not working, since they can kick you out at any time and/or charge the swaps afterwards if they determine you are abusing this. Read the T&C. They are certainly not going to pay for your free lunch..

Yeah, you're not the first person to have figured this out, or even the 50th. And the guys offering Islamic accounts are way ahead of you on that one.

 

[doggyfx]

Anybody knows is it makes sense to earn swaps on swap-free accounts trading on USDRUB or USDZAR. What are the pitfalls there?
My broker Tickmill offers swap free account for free, so I need to find second broker which also offers swap free account and have decent margin to open opposite positions on both. Spreads is the only cost then, the more I keep position open the more I earn.
What is your view on that?

Well it may work but if you disguise those trades with others, it may not constitute a whole strategy but yield you some stable profits along with other trades. And yes read their ToS as its clearly an abuse of their platform.

 

[dabang]

I have heard that islamic accounts are swap free.. then what is this swap arbitrage, thanks for guiding me on this silly question that i have asked here.

 

[carrer]

I have heard that islamic accounts are swap free.. then what is this swap arbitrage, thanks for guiding me on this silly question that i have asked here.

Buying/selling on an account which is non-Islamic and taking the opposite trade for the Islamic account. You will make money from the swap.

Example.
You long NZDUSD on your non-Islamic account and let's say you make 4% out of the swap.
You will then short NZDUSD in your Islamic account to hedge your position.
You will make a guaranteed return of 4%, before commission and spread.

 

[Sig]

Buying/selling on an account which is non-Islamic and taking the opposite trade for the Islamic account. You will make money from the swap.

Example.
You long NZDUSD on your non-Islamic account and let's say you make 4% out of the swap.
You will then short NZDUSD in your Islamic account to hedge your position.
You will make a guaranteed return of 4%, before commission and spread.

And don't forget the cost of transferring money between those two account repeatedly as one goes to zero and you have to top it off from the other. As well as how obvious that behavior is to the company you're taking advantage of.

 

[doggyfx]

And don't forget the cost of transferring money between those two account repeatedly as one goes to zero and you have to top it off from the other. As well as how obvious that behavior is to the company you're taking advantage of.

I wonder, despite widespread notion that this is a platform abuse, anything more behind that? They set swaps on their swaps, you open and close trades, pay spread, don't arbitrage or play off-market, an opportunity to make money risk free is not their fault but an opportunity created by Central Banks policies, many large investors benefit from.