Usd/cad

Yes of course, one would need a much bigger account to hold such a position.

I was only curious, since Ivan mentioned he had made 5K on this trade.

I find it hard to believe that the difference can be so large.:confused:

Just to clarify, was the profit on the FX account for this move really 5K?

Why would anybody trade FX then, if the same move can net so much more in the futures markets?



Quote from TL Trader:

I came up with $444,800 less commissions of course. Only comment is that 320 contracts might be hard to get off on a single trade. Not that I would know from personal experience. I'm just looking at the DOM.
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Optionpro - If you're suggesting my profit was not 5K, I assure you, it was.

I stated - at least a week or more ago - that I took on 400,000 units at 1.1303.

Thanks, Kastro.
 
Would not have been the exact amount, in futures, due simply to contract size granularity.

Spot: long 400,000 USD/CAD @1.1303, exit @1.1465 (+162 pips) -->

P&L (spot) = 400,000 x 162 x 0.0001 / 1.1465 = $5,652.

Futures: each 6C contract is CAD 100,000 and, as mentioned, tick value is $10. We would've gone short 6C, of course, rather than long. 162-pip move in spot is equivalent to 125-tick move in futures (1 / 1.1303 - 1 / 1.1465) -->

P&L (futures) = 125 x $10 = $1,250 per contract. E.g., $5,000 P&L on 4 contracts.

We can ignore the change in futures basis from March 2nd to 7th, because it's got approx. the same impact on the bottom line as the interest credit in spot, earned over ~115 hours, about $24.

Had the spot position been, say, long 353,888 USD/CAD, i.e., short CAD 400,000 @1.1303 (the exact equivalent of 4 futures contracts), profit would have been:

P&L (spot) = 353,888 x 162 x 0.0001 / 1.1465 = $5,000, as expected.

The bottom line: exactly the same bang for the buck (leverage-adjusted return) in futures and spot. Other, non-quant factors differentiate, as usual.

Oh, and very nicely done, Ivan!
 
Ivan, sorry for the misunderstanding. I believe you reg your profits and respect very much your market calls.

thank you guys for your imput. my question had more to do with the return based on capital at risk.

with 4 CAD contracts I would only be tying up 5K. with 400.000 units on the spot market wouldn't I be tying up $400K?

I don't trade forex so please forgive my ignorance if this is a real naive question....
 
No, still basically the same return on capital at risk, between forex and futures, adjusted for specific leverage and margin.

At a 50:1 forex dealer such as the one here, 400,000 USD/CAD uses up $8,000 of margin. That's all you need to have in your account, to be able to put on that position.

At a 100:1 forex dealer, 400,000 USD/CAD uses up $4,000 of margin.

If your futures broker requires $1,250 margin per 6C contract valued at CAD 100,000, or $88,472 @1.1303 (at trade inception... obviously, less now @1.15+), that works out to about 71:1 max allowed leverage (again, less now). That is, in between those 2 forex examples.

Thanks to those specific details, i.e., real-world leverage / margin differences, you'll get somewhat different ROI. Same calculation mechanics, though.
 
Quote from Ivanovich:

You're not tying up 400,000K because you'd be (in my case) playing on 20:1 margin.
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20:1? You don't say... Careful, or you'll scare the timid, milk-toast, 200:1 - 400:1 crowd away. :p
 
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