Thread: interest hedge strategy - futures and forex

Originally Posted by ;

Well this isn't neccisarily arbitrage, well it is but not in the conventional sense...

yeah it's! You're talking about arb, as timeless as it comes

You can trade futures and forex through VCAP. I believe there are brokers which allow this. You'll need to be a CTA if in the 17, if you're trading customer funds.
VCAP allows offsetting forex with futures contracts for an extra fee. I still don't understand what this fee is.
Contemplating arbing the two tools if you are arbing majors around news events there is a significant profit potential since futures spike exceptionally quickly and forex spikes substantially slower. Gaps are found in both markets however much different gaps prevail as forex is fragmented and futures is a solid central marketplace. One could make the comparison that stocks are similar to working on a single server while forex really is similar to operating between 8 servers. These 8 servers have latancy while talking between each other.
If you were to hedge in the arb as an interest positive position on forex you could essentially pay for the forex exchange by getting into the futures at a significantly less expensive premium during amounts. It would take some work/studies and a server using FIX API access to both markets. There is no doubt in my mind this is going on right now but I feel that the major money has been made immediately and not contemplating swap. I've said it. . .You can earn 2 pips of Swap a day trading GBPJPY or you could scalp 2 pips a day of GBPJPY. Which is simpler?
I commend your efforts and I am seeing this thread. IB seems like a fantastic place to start.
From the US your account is going to be domiciled on the futures with a cross funding agreement to finance forex from the futures account. Not many brokers allow this simply because the backoffice time/money is much greater on the side. Hence that the broker is making money on your forex trades essentially. It can be achieved make no doubt it can be done. The advantage is in case the forex dealer/enumerated counterparty/FCM goes beneath your funds domiciled in the futures side are protected/segregated from the bankrupt counterparty.

Here is a formula illustration to figure the Futures price and
compare it to the quoted futures price based on a idea
from a forum member, TheEconomist.

Calculated EUR/USD Futures = Spot X (1 USD yield% until
Futures expiry) / (1 EUR yield% until Futures expiry)

Hi people,

so if I know you guys the spot and futures out the same interest-wise.

At the second EUR/USD is a difference of about 40 pips.

So you buy spot EUR/USD and get interest daily and before the futures contract expires in September, you get basicly 40 pips in interest if your forex broker would give you the full interest differential with this pair.

So in September these prices are still about 40 pips different.

But maybe I'm incorrect????????