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Arbitrage with no-interest broker

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  • First Post: Nov 29, 2006 3:44am Nov 29, 2006 3:44am
Has anyone tried hedging 2 different brokers one offering no swap while the other charging interest and end up earning in the process? based on my computation, if i buy 10 lots of USD/JPY from my broker that charges interest and then i sell 10 lots USD/JPY from the no-swap-broker, in theory I will earn around 136 dollars a day or 2,739 dollars a month.

This might sound too good to be true.

Can anyone enlighten me on the matter?
It s possible... just need the money at the beggining =)
you should do it with the pound yen
the swap is usually bigger =)
Quoting titikokatiting
Has anyone tried hedging 2 different brokers one offering no swap while the other charging interest and end up earning in the process? based on my computation, if i buy 10 lots of USD/JPY from my broker that charges interest and then i sell 10 lots USD/JPY from the no-swap-broker, in theory I will earn around 136 dollars a day or 2,739 dollars a month.
This might sound too good to be true.
Can anyone enlighten me on the matter?
The broker with no interest won't allow you to do that if they notice it. You'll have to change your second broker continuously.
Are no-swap brokers legal? If they indeed are, how can they afford to do it, considering that they are paying the banks?
Quoting jon167
The broker with no interest won't allow you to do that if they notice it. You'll have to change your second broker continuously.

how would they know that?
im planning to do it next week, 50,000 dollars for each broker. if im gonna earn 2,736 dollars a month, thats 32,832 dollars a year. thats 32% return on equity. after 12 years, the value will be $ 2,798,254. comments?
Quoting titikokatiting
how would they know that?
If you trade continuously pairs with negative interest for them, you are causing losings to your broker. Maybe if you make diverse strategys they'll allow you to do that but if you only trade to earn interest in another broker (they notice it if you are always short on GBP/JPY for example) they'll close your account for sure.
I think the best way to do it is to trade a pair with positive interest for you in forex and open an opposite trade in futures (no interest). For example you can buy GBP/JPY, NZD/JPY, etc. in forex and sell them in Futures.
Quoting jon167
If you trade continuously pairs with negative interest for them, you are causing losings to your broker. Maybe if you make diverse strategys they'll allow you to do that but if you only trade to earn interest in another broker (they notice it if you are always short on GBP/JPY for example) they'll close your account for sure.
I think the best way to do it is to trade a pair with positive interest for you in forex and open an opposite trade in futures (no interest). For example you can buy GBP/JPY, NZD/JPY, etc. in forex and sell them in Futures.
I read that you can use OPTION to take the part of the negative swap position. But some explains that the price of such options may be too costly as well.

Anyone care to explain FUTURES and OPTIONS.
Quoting jon167
If you trade continuously pairs with negative interest for them, you are causing losings to your broker. Maybe if you make diverse strategys they'll allow you to do that but if you only trade to earn interest in another broker (they notice it if you are always short on GBP/JPY for example) they'll close your account for sure.
I think the best way to do it is to trade a pair with positive interest for you in forex and open an opposite trade in futures (no interest). For example you can buy GBP/JPY, NZD/JPY, etc. in forex and sell them in Futures.
not familiar with futures though...how does Futures work?
Quoting titikokatiting
im planning to do it next week, 50,000 dollars for each broker. if im gonna earn 2,736 dollars a month, thats 32,832 dollars a year. thats 32% return on equity. after 12 years, the value will be $ 2,798,254. comments?
Have you considered margin calls? You must have a big account in bother brokers to maintain those trades with no margin calls.
Quoting BurgerKing
I read that you can use OPTION to take the part of the negative swap position. But some explains that the price of such options may be too costly as well.

Anyone care to explain FUTURES and OPTIONS.

thanks...Have you tried options?
Quoting BurgerKing
I read that you can use OPTION to take the part of the negative swap position. But some explains that the price of such options may be too costly as well.
Anyone care to explain FUTURES and OPTIONS.
Much better futures.
In options you have to pay the premium and in futures only the commission. If you buy a lot of GBP/JPY in forex an want to hedge your position in options for a month for example you'll have to pay more than 50 pips to do it but only a little commision in futures.
Quoting jon167
Have you considered margin calls? You must have a big account in bother brokers to maintain those trades with no margin calls.
yup, if after 1 month, my other account is losing 40,000 and the other is gaining 40,000. i'll close both my position then transfer my earnings from one account to another and then continue to trade again...what do you think?
Quoting jon167
Much better futures.
In options you have to pay the premium and in futures only the commission. If you buy a lot of GBP/JPY in forex an want to hedge your position in options for a month for example you'll have to pay more than 50 pips to do it but only a little commision in futures.
thanks jon167...is there also a margin call in futures?
Quoting BurgerKing
I read that you can use OPTION to take the part of the negative swap position. But some explains that the price of such options may be too costly as well.

Anyone care to explain FUTURES and OPTIONS.
Thanks burger king, dont you want to try this system?
Quoting titikokatiting
not familiar with futures though...how does Futures work?
For example the current price of a pair is 1.2000, you have bought the pair in forex and want to hedge your position in options or in futures for a month.

OPTION: you pay X pips to have the "option" to sell it if the price is down 1.2000 at the end of the month. If the price is above 1.2000 you simply lose the premium (X pips, in this case 50-100 pips).

FUTURES: you sell the pair with no money, simply have to maintain a margin in your account (I think the leverage is 1:20) and at the end of the month you have to pay if the price is above 1.2000 or receive gains if the price is under 1.2000. The value of a pip here is the same that in forex.

Sorry, but my english is not enought good to explain it better.
if you have so much money, i know you can do it. But it s a bit complicated... you have to make trnasfers constantly...y ou see waht i mean...

You have to fund and refund constantly the loosing account... And you have to be sure to have enough margin to hold at least .... lets say 1000 points move... you never know...

If you have all of this... the broker will never know.

You are buying pound yen in one broker... long long long... he will hate it, you will make lots of profits... but thats the forex =).

And you will be looosing money with the other... and aalways refunding =)
he will like it =)

Anyway =


good luck...
Quoting titikokatiting
yup, if after 1 month, my other account is losing 40,000 and the other is gaining 40,000. i'll close both my position then transfer my earnings from one account to another and then continue to trade again...what do you think?
And you pay spreads every time you close trades. In NZD/JPY you earn about $90 interest a day for a million. How much do you pay in spreads for a NZD/JPY million? To be profitable you have to do long trades.
In Futures there are margins. You must have enough money to cover possible loses at the end of the period.
In my opinion you should trade with a broker with allow to trade in both markets with the same account to avoid margin calls. What you are earning in one market you are losing in the other one.

Quoting titikokatiting
thanks jon167...is there also a margin call in futures?
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