Thread: interest hedge strategy - futures and forex

Originally Posted by ;

Have a look at the futures price and the spot price. You will notice there is a difference in the prices; that this gap is that the interest rate , ie. The interest you get on your place trade should just (barring tiny mis-pricings) by off-set from the premium (that is the reason why stocks do not pay interest) of the futures contract, which will proceed to zero by expiry.

Here's your response mestx41

btw, dont hesitate to try this egy, its a fantastic exercise. I figured that this stuff out by attempting it, there no harm actually, only keep the amounts little. Every forex trader should know how to trade futures, that in itself is a good reason to try your idea.

Originally Posted by ;

I feel that the cost to maintain open a futures contract is pretty large.

Some brokers may charge an overnight holding commission, but many do not. For the ones which don't, there is no price of holding a futures contract , and the IRD is embedded at the price (that is often more beneficial compared to the IRD to a place position, as brokers typically pad their interest rates). The experts (true IRD, tax benefits) and the disadvantages (no crosses, 5-6pm EST daily blackout, restricted liquidity at the non-majors) are effectively a clean. Both are traded by me.

Thank you for the response guys. . I think I will give it a try, I'll use demo's on it for today (anyone know if futures firms have demo's?) . .work the formulas out to see the ratio of that I'll need to invest in each one, and let you guys know how it goes =]. I'll put some money into it if I can get it to work. I run about 3 egies to produce a living and don't have enough opportunity to watch any more charts, so if that works it'll be great since no analysis will be involved..hey if that works it's free money.

Originally Posted by ;

hey if this works it's free money.

I'll spare you the moment, it absolutely won't work. There is not any free lunch. Learn more about ahead points and you will understand how the futures contract are priced. All the major players in the market have automated systems that make the most of any spot/future arbitrage scenarios in a millisecond.

Have a look at this thread and how individuals came and assisted out the poster. This is what FF is all about.
Faure answered the question quite well then KGB came with a few in depth stuff.
Kevin get over to my new thread on Correl trading EURUSD USDCHF.
Https://www.forexsoutheast.asia/cryp...eleration.html
We will need to put some effort into this again.

I will say one thing about swap. You can concentrate on earning 1-2 pips a day on swap or you'll be able to scalp 2 pips a day and get in and out from the market in two minutes to lower your exposure.

Originally Posted by ;

I'll save you the time, it surely will not work. There's no free lunch. About forward points and you'll understand the futures are priced. All the major players in the market have automated systems that make the most of any spot/future arbitrage scenarios in a millisecond.

Would noty'understand computers are fouling things up again!

Originally Posted by ;

I will save you the time, it absolutely will not work. There's no free lunch. About forward points and you'll know the way the futures contract are priced. All the major players in the market have automated systems which make the most of any arbitrage situations in a millisecond.

Well this is not neccisarily arbitrage, well it is but not in the traditional sense. . .it's much from trading miliseconds, I have been analyzing and it is feasable except for one issue..money transfer. In order to get rid of the gaps in percent change you need to withdraw and inject funds between accounts almost daily. If there is a platform where you are able to trade futures and location in precisely the same place I think that it can easily be done. By the way thanks everybody for contributing it's very much appreciated.

Originally Posted by ;

If there was a platform where it is possible to trade spot and futures in the exact same place I think that it can easily be done.

InteractiveBrokers provides both from the exact same platform.

Oooo... I luv away from the box stuff.

I wonder, with a little math involved, you could figure out the amount of days you'd be required to hold the place to Double the Premium of an Offset Choice Premium?

Saxobank allows FX and Futures trading from precisely the exact same account.
( non US only )
This will avoid the need to transfer capital between different accts.
Recall a Futures point = $12.50 while a pip = $8.50.
( figuring to exchange yen and franc just )
It is doable, but you have to look for extremes in the spread to get your ratio right.
Trading Futures is very cheap exclusive of the margin.