Swaps/Rollover Interest in Futures???

mmccormac · Jan 13, 2007

"Who is your broker? Do they post their interest earned/expense rates on their website? To their credit, IB presents everything quite clearly. Very few other brokers follow such an example unfortunately. Even if your broker offered IB's rates, that's ~150BP (over the true IRD) that you're paying to them for your spot trades."

I have my funds split between 5 accounts and they all offer different Swap rates. On my USD/CHF longs I make around $100 per day on 1m (3,000/mo). On my GBP/JPY longs I make around $220 per day on 1m (6,600/mo). I also use a hedge strategy when price is going the wrong way to keep my balance going up even when my carry trades are going down and this would not change with the Futures so that's why I'm not worried about being marked to market everyday.

I have found a way to get any brokers swap rates if they feed data into MetaTrader and I track a few of them that way. A few of my accounts are quite annoying since like you said some don't post the rates. Funny you mention IB as many of the ECN's totally kill you on Swap even though they are "direct interbank". Thanks for you're help!

late apex · Jan 14, 2007

1.

Quote from mmccormac:

2. Can anyone explain Rollover (contract rollover not daily swap) in the futures markets? Is there a way to rollover a contract without taking profit/taking a loss? I manage most positions I have back to profitability and like to hold them long term in some situations so this is important.

Thanks for anyone that can provide information... All I've been able to find out is general info "The swap is priced in" or "yes you can rollover positions" and would like to know how you futures traders (That trade currency) handle or figure the Swap rates and how you rollover your contracts without taking profit or a loss. Thanks!

While currency futures offer better implied IRD and certain other benefits compared to cash forex (spot), the short answer to your question "Is there a way to rollover a contract without taking profit/taking a loss?" is NO.

2.

Quote from mmccormac:

Well, as long as I can hold the contract then it should kind of be the same... When I have Spot positions running against me it is a floating loss (Which eats my margin and equity anyway) and is offset by hedge trades and other positions held. So the position is "marked to market" everyday and the balance goes up or down but that isn't a concern as it's really the same in the Spot market (The loss is there just the position is not closed out). But so I understand It's marked to market and the balance goes up or down but the position is still floating (don't have to re-enter and pay a new commission and spread) and I will be able to collect the daily swap (that's priced in) and rollover my position before contract expiration if the position is held that long? Thanks for your help. Just want to be sure I understand it correctly.

I'm not sure if you're clear on this point yet... No, it doesn't work that way in futures. If your position is showing a floating, unrealized loss and the contract is about to expire, you have no choice but to realize that loss. If you do nothing, the loss will be realized for you.

3. Before you invest any time or effort in this, have you looked at futures liquidity in the pairs you hold? You should. Pound-Yen cross has virtually no liquidity, on a good day.

4. Take a look at this thread for a comparison of spot v. futures IRD at IB and a discussion of a few related issues.

cvds16 · Jan 14, 2007

trader KGB gave a perfect explanation on how intrest and forex futures work, so yes you have been cheated on your swap rates in the case a futuresmarket with decent volume existed. eur/usd, gbp/usd, chf/usd and jpy/usd are the four main forexfutures where i'm sure enough liquidity exists. There might be more where you could get decent prices, but i'm not too sure about that. I do however not agree with the last poster about the taking of profit and loss, you take it everyday like trader KGB explained. Your net result everyday is the sum of the way the market moved and the intrest you received or payed. At rollover the futuresprice with intrest has converged to spot price. Rollover is just a way to end the paying of intrests and start allover again with a new expiration date three months further.

late apex · Jan 14, 2007

cvds16, both quarterly rollover and daily MTM (mark to market) are two sides of the same coin; both are futures deal-breakers for the OP. You do see that, right? Just so we don't accidentally miss the forest for the trees.

GBP/JPY is one of the specific pairs he is working with. Another deal-breaker, due to daily volume which would make Lumber look like a paragon of liquidity.

Other than those "minor details", I showed in excruciating detail (I hope), nearly a year ago, that futures give you a much better deal on IRD than spot, at least at one major broker offering both.

mmccormac · Jan 14, 2007

Quote from late apex:

cvds16, both quarterly rollover and daily MTM (mark to market) are two sides of the same coin; both are futures deal-breakers for the OP. You do see that, right? Just so we don't accidentally miss the forest for the trees.

GBP/JPY is one of the specific pairs he is working with. Another deal-breaker, due to daily volume which would make Lumber look like a paragon of liquidity.

Other than those "minor details", I showed in excruciating detail (I hope), nearly a year ago, that futures give you a much better deal on IRD than spot, at least at one major broker offering both.

Thanks for you're help. With my trading style there is a major advantage to the Spot markets, so for my carry trades it looks like I will not change what I'm doing. For my short term EUR trades I may trade the EUROFX as the liquidity looks ok most of the time.

For most traders the futures markets are the best option due to the security of funds, but for traders like myself there is a major advantage to trading SpotFX. I get paid a decent swap right now but I believe there are large banks that will pay the true amount due on LIBOR/LIBID interest rates.

"at least at one major broker offering both" - Who do you recommend for security of funds and for true swap payout?

Thanks everyone!