which base currency to choose for IB account

globalarbtrader said:
No, it doesn't matter.
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3) You have a EUR account, fund with EUR. Just before you trade you sell EUR and buy USD. You buy a USD instrument. You aren't paying interest to borrow USD (nor do you earn EUR interest, but that is irrelevant). This is good, and apart from the conversion is equivalent to (1).
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GAT
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I agree but it depends on the strategy:
For instance, in case of day trading, nothing is required. At the end of the day one gets his or her USD P&L.
In case of investing, buying USD seems correct but one ends up with FX risk. If one wants to cover this risk, then buying USD for 125000 EUR implies buying one EUR.USD futures contract. So, investing in USD the equivalent of 30000 EUR is not enough to cover the FX risk with one EUR.USD futures contract and the USD risk remains.
 
betcashrun said:
I agree but it depends on the strategy:
For instance, in case of day trading, nothing is required. At the end of the day one gets his or her USD P&L.
In case of investing, buying USD seems correct but one ends up with FX risk. If one wants to cover this risk, then buying USD for 125000 EUR implies buying one EUR.USD futures contract. So, investing in USD the equivalent of 30000 EUR is not enough to cover the FX risk with one EUR.USD futures contract and the USD risk remains.
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Yes it's horses for courses. I don't day trade, and I'm not bothered about FX risk. So there is no reason not to do the FX translation, and avoid paying the interest charges. I'd argue that for most people FX risk is just noise, it might add or subtract 2% a year from my account value, which is dwarfed by the vol of the 'real' trading; my actual futures profits are more like -15% to 45%. There's also a nice diversification effect from having your cash spread out amongst diferent currencies.

Another argument is that you shouldn't do the FX exchange when the interest rate spread is in your favour, but this is just a very inefficient way of getting exposure to the unpleasantly short gamma FX carry strategy (inefficient because of the spreads applied to the borrowing/lending rates by the broker).

GAT
 
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opcan77 said:
Hi,
I am considering opening an account with IB. I will be trading option, spread-base strategies mainly on US equities and indexes. I will be having 30-60% market exposure, the rest will be in cash (not considering exposure to bonds however maybe I should). I am European so from this point of view would be probably good to open an account in EUR base currency. But when trading US market I will have to pay an interest charges for borrowing dollars. I contacted IB to figure out the interest rate and they advised using this calculator:https://www.interactivebrokers.com/en/index.php?f=1595

However, I am not that smart to figure it out. Let say I have 100 000 EUR and I will be having 30 000 EUR invested for three months. How much I will have to pay for the interest. If any of you guys or IB staff could help I would be very glad…
(the account could be bigger than 100 K)

I read this interested thread:
https://www.elitetrader.com/et/threads/negative-interest-rate-interactive-brokers.339133/;and learn that there is a negative interest rate charge when holding cash in EUR currency base account. Where one can figure out the rates for various currencies considering various balances?

Considering all this looks like open an account in USD would be probably a better idea .. ?
Thank you very much
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You can change your choice of base currency at any time. It is not a one-time-only choice. The main purpose for the base currency is to determine what currency is being used in the monthly reports which IB will send to you. All interests are calculated on the actual currencies you are using in your account (e.g. cash amounts, margin requirements).
 
globalarbtrader said:
Opening a EUR account, and on day one translating all your deposit into USD will be exactly the same as opening a USD account and funding it with dollars.
GAT
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Rob,
In case of having a EUR account and USD deposit.This is technically having FX position, being long USD, correct?
 
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