DislikedThis math is wrong for a couple of reasons.
1. No broker will give you BM rate - it will always be offset by a negative delta. For instance, mine pays 6.2% (BM - 0.5%).
2. You will be charged debit interest on the short USD balance, which, similarly to the above is calculated as BM + some offset (1.5% for me).
Given the above, in my example the carry trade benefit would be 6.2-5.76 = 0.44%. Assuming your leverage, no decline in the exchange rate from your entry point, and that the rate fluctuations in the meantime don't put you in a margin call situation, your total gain over the course of the year is 10^6 * 0.44% = $4400.Ignored
The math isn't wrong, it's the brokers that don't offer the true swap rates. So far, in my book, ODL has better swap rates than most brokers. I've been doing testing on swap rates with various brokers. Here is something for everyone to think about.
Opened the following positions on 8/31/2007:
AUD/JPY (LONG) @ 94.91 TTL Interest earned as of today: 18,078.88 on a $10,000.00 LOT
GBP/JPY (LONG) @ 234.38 TTL Interest earned as of today: 38,518.18 on a $10,000.00 LOT
These are in demo accounts. Once again, I will stress I have been testing out various scenarios. On various currencies. I don't have the time to go into all of this. If you or anyone else wants to find out more, do you testing before stating that someone's math is wrong. I've spent my time researching and analyzing. Do your own research and come out with your conclusions.
Also, how could I be margin called when I am looking to go in when the market hits bottom and I only utilize 0.5% of my total account per position?
Humble Lifetime Member