what's the advantage of fx over FX futures?

Quote from Traveler:

I'm going to say cash FX is popular due to customizable (small!) position sizing and high leverage compared to CME fx.
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In the US, leverage/span margins are about the same. Intraday, however, you get some good margins with one of those $500 brokers.

The best benefits of spot over futures is the customizeable size and the liquidity. CME has mini and micro contracts but there is relatively little liquidity on them.

Best benefit of futures is the central clearing of all contracts. Even in this day, there are still too many untrustworthy spot brokers looking for your business.
 
It all depends on what you are looking for.

- If you are small/medium player looking at trading mainly USD based pairs and the strategy is the exchange rate going up or down then there is not really that much difference though fx has slightly longer hours

- if you are trading non USD pairs, for example EUR/AUD then you have to go with fx as these pairs are hard to construct in futures market

- if you are a micro lot player, for example 25,000 of EUR/USD then have to go with fx as the main contract in futures has a size of 125,000 and the mini contracts have less volume/liquidity

- if you have a specific amount requirement, for example need to buy 1,399,450 of EUR/USD then have to go with fx as cannot construct exact size like that in the futures market

- if your strategy is to earn carry interest like going long AUD/JPY where you earn the AUD-JPY interest rate differential then have to trade fx as futures dont earn any interest

I think those are some of the main differences
 
Quote from aginvest88:

if your strategy is to earn carry interest like going long AUD/JPY where you earn the AUD-JPY interest rate differential then have to trade fx as futures dont earn any interest

I think those are some of the main differences
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Incorrect. The swap in the futures is embedded as a discount to spot (+swap) or a premium to spot (-swap). Same goes for vanilla options on pairs with a material swap rate. An ATM option synthetic on a +swap pair will be expressed as P - C > 1.
 
yes sure if you hold it to maturity, you should gain in futures the int that could have been earned in fx.

Though I wonder if on a day to day basisthe relationship gets exhibited explicitly.
 
Quote from aginvest88:

Though I wonder if on a day to day basisthe relationship gets exhibited explicitly.
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Ya, it does. The arbitrage makes it so. Obviously the rate-differential has to be reflected in price, as there is no "coupon" in futures. If they (spot and futures) were to trade "even" then you could buy the (+swap)spot, sell the futures and pocket the rates (riskless swap).

This is FX 101. I suggest you read Hull or similar.
 
Yes, reading Hull would be very helpful.

And yes you are right for someone trading size if there is any discrepancy(even if very small) that can be exploited

I was talking from a small trader(like i am) pov where I have a very small book and on my trading size exploiting very small edges(if they are ever present) will not help me make a living.
 
Quote from aginvest88:

Yes, reading Hull would be very helpful.

And yes you are right for someone trading size if there is any discrepancy(even if very small) that can be exploited

I was talking from a small trader(like i am) pov where I have a very small book and on my trading size exploiting very small edges(if they are ever present) will not help me make a living.
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It's not necessary to understand the mechanics, as long as it doesn't keep you from trading futures out of a misplaced belief that futures are somehow inferior.

Personally, I prefer to trade spot.
 
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