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IRA(interest rate arbitrage)

  • Post #1
  • Quote
  • First Post: Nov 6, 2006 2:19pm Nov 6, 2006 2:19pm
Hi,

is anyone taking advantage of IRA(interest rate arbitrage)?
There is an interesting atricle about that @ FF:
It suggests that there's a method for consistent, safe profits using IRA & hedging.

Cost & Carry (The "perfect" Hedge)

Now I wonder if any trade here is using a concept like this one?
Quoting tradeigel
Hi,

is anyone taking advantage of IRA(interest rate arbitrage)?
There is an interesting atricle about that @ FF:
It suggests that there's a method for consistent, safe profits using IRA & hedging.

Cost & Carry (The "perfect" Hedge)

Now I wonder if any trade here is using a concept like this one?
Not me. At least not for the moment.
Quoting tradeigel
Hi,

is anyone taking advantage of IRA(interest rate arbitrage)?
There is an interesting atricle about that @ FF:
It suggests that there's a method for consistent, safe profits using IRA & hedging.

Cost & Carry (The "perfect" Hedge)

Now I wonder if any trade here is using a concept like this one?
Yes, I am currently working on something like this. 250% isn't feasible, as mentioned here, but it's still pretty high.
Quoting mrmikal
Yes, I am currently working on something like this. 250% isn't feasible, as mentioned here, but it's still pretty high.

Well...interesting, please keep us posted!
Quoting tradeigel
Well...interesting, please keep us posted!
Currently trading with the USD/JPY. We have not required a rebalance in a total of 49 days. Our current profit for that period is 8.4%. We are looking to optimize this, but with absolutely no interaction for almost 50 days, it's just as good (if not better) than investing in the stock market.
Wow, that's great. Definately beats all the conventional ways of (~safe) investment.
Thank you mrmikal!

Quoting mrmikal
Currently trading with the USD/JPY. We have not required a rebalance in a total of 49 days. Our current profit for that period is 8.4%. We are looking to optimize this, but with absolutely no interaction for almost 50 days, it's just as good (if not better) than investing in the stock market.
I did this for a while with GBP/JPY, it worked fabulous. I had a 250k position long earning interest and was "perfectly" hedged in an interest free account (which is no longer interest free) . Was great while it lasted. The 250K position was yielding around $50/day, every day, $150 on Wednesday. Apparently there are some brokers abroad, MA I believe and Fx Trader.net (I think, don't hold me to it) that will set up accts that don't charge rollover. Being here in the US I feel nervous sending my money overseas. Just my 2 cents. Though a bit risky I thought it work to enter a long in the interest bearing direction, ie long GBP/JPY, then set a limit Sell order equivalent to the spread that many pips away to hit after rollover than close the short prior to rollover the following day and re-enter on a limit order after rollover.

So if the spread is 10 pips, enter long @ 224.34 just prior to rollover, then set a limit order hedge sell @ 224.44 right after rollover and you've earned your interest. This pair is so volatile I couldn't see your order not getting filled a measely 10 pips away but who knows. The bottom line is the interest payout on GBP/JPY is approx 2 pips/day, not bad but I've come to realize I can do much better than that trading my own strategies
Quoting metamanny
I did this for a while with GBP/JPY, it worked fabulous. I had a 250k position long earning interest and was "perfectly" hedged in an interest free account (which is no longer interest free) . Was great while it lasted. The 250K position was yielding around $50/day, every day, $150 on Wednesday. Apparently there are some brokers abroad, MA I believe and Fx Trader.net (I think, don't hold me to it) that will set up accts that don't charge rollover. Being here in the US I feel nervous sending my money overseas. Just my 2 cents. Though a bit risky I thought it work to enter a long in the interest bearing direction, ie long GBP/JPY, then set a limit Sell order equivalent to the spread that many pips away to hit after rollover than close the short prior to rollover the following day and re-enter on a limit order after rollover.

So if the spread is 10 pips, enter long @ 224.34 just prior to rollover, then set a limit order hedge sell @ 224.44 right after rollover and you've earned your interest. This pair is so volatile I couldn't see your order not getting filled a measely 10 pips away but who knows. The bottom line is the interest payout on GBP/JPY is approx 2 pips/day, not bad but I've come to realize I can do much better than that trading my own strategies
Yes, I have looked into optimization of this method and found that while the GBP/JPY interest rate is excellent, the pair is to volatile to overcome the spread...the method you mentioned (about trying to fill a hedge at break-even) is somewhat counter-productive. Furthermore, the volatility on the pair, makes it somewhat difficult to manage seeing as you'd probably have to rebalance or move money around from account to account fairly often.
  • Post #9
  • Quote
  • Last Post: Nov 7, 2006 9:29am Nov 7, 2006 9:29am
interesting, metamanny...
It's diffinitely a method to consider trading...
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