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Arbitrage with no-interest broker

  • #21
  • Nov 29, 2006 4:24am Nov 29, 2006 4:24am
Quoting jon167
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.

Thank you very much for that. i'll try to study futures...

anyway, i need you to comment on this, what if i have a short position USD?JPY (10 lots) in my no-swap broker, and i'll make it a point to trade mini lots, .1 lot and make it a long position, then if i lose 3 dollars, i will close my position, and i will do it 3 X a week, do you think they will still be suspicious on my short position (10 lots)?
  • #22
  • Nov 29, 2006 4:32am Nov 29, 2006 4:32am
Quoting jon167
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.
i know a broker that has a 1 pip spread and no swap nor commision and i'll use that for my short position, and another broker with 2 pip spread if you open 50,000 dollars. im gonna do with USD/JPY that earns 137 dollars a day. i'll be able to recover the spread in 3 days everytime i close a position which i think will happen very often cause before i have my margin call, i have to lose 4000 pips, which i think will happen only after 2 to 3 weeks or maybe a month. what do u think?
  • #23
  • Nov 29, 2006 4:36am Nov 29, 2006 4:36am
Quoting jon167
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.
Where do I get more info on FUTURES?
  • #24
  • Nov 29, 2006 4:37am Nov 29, 2006 4:37am
Quoting biwy
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...



hehe...thanks. what im gonna do is im gonna close all my position in both broker if im near my margin call so that i have lots of time to withdraw from my other account to transfer it to my other account. hehe...
  • #25
  • Nov 29, 2006 4:39am Nov 29, 2006 4:39am
I have no experience in futures market but I intend to do this in advance.
With a $100.000 account in a broker with allows to trade in both markets: buy 1 million NZD/JPY in forex (1:100 leverage) and sell 1 million in futures (1:20 leverage) and maintain them for a year.
At the end of the year: about 70% profit.
If you can do it with 2 forex brokers ... much more profit, of course. No problem if you have to change money from one to other.
  • #26
  • Nov 29, 2006 4:43am Nov 29, 2006 4:43am
Sure is. My guess is when the broker spots what you're doing (and he will!) he'll close the trade. best of luck with this though.
  • #27
  • Nov 29, 2006 4:48am Nov 29, 2006 4:48am
Quoting jon167
I have no experience in futures market but I intend to do this in advance.
With a $100.000 account in a broker with allows to trade in both markets: buy 1 million NZD/JPY in forex (1:100 leverage) and sell 1 million in futures (1:20 leverage) and maintain them for a year.
At the end of the year: about 70% profit.
If you can do it with 2 forex brokers ... much more profit, of course. No problem if you have to change money from one to other.
really? can i also put my earnings in forex to futures if my account in futures is losing? or vice versa? can i close position in futures whenever i want?
  • #28
  • Nov 29, 2006 4:50am Nov 29, 2006 4:50am
I've read about it in several forums, but I don't know where exactly.
Today I've read a message from feb2865 telling he trades only in futures.
http://www.forexfactory.com/forexfor...ad.php?t=10455


Quoting BurgerKing
Where do I get more info on FUTURES?
  • #29
  • Nov 29, 2006 5:02am Nov 29, 2006 5:02am
The ideal way would be to trade both markets with the same account. If not, I suppose you'd have to transfer money continuously between them.
I think in futures you can not close the trade until expiration. In options there are two styles: american and european. in one of them you can close it when you want and in the other one no. Maybe in futures there is something similar, but I think not.


Quoting titikokatiting
really? can i also put my earnings in forex to futures if my account in futures is losing? or vice versa? can i close position in futures whenever i want?
  • #30
  • Nov 29, 2006 5:06am Nov 29, 2006 5:06am
Quoting jon167
The ideal way would be to trade both markets with the same account. If not, I suppose you'd have to transfer money continuously between them.
I think in futures you can not close the trade until expiration. In options there are two styles: american and european. in one of them you can close it when you want and in the other one no. Maybe in futures there is something similar, but I think not.
thanks, i'll do a research on that...
  • #31
  • Nov 29, 2006 5:16am Nov 29, 2006 5:16am
there's a hedgeEA on the forex-TSD forum which hedges GPYJPY(long) against CHFJPY(short) and collects the large swap difference. I've had a bit of success with it on demo. Uses a clever correlation and bollinger logic.
TRADE FOR SWAP
  • #32
  • Nov 29, 2006 5:27am Nov 29, 2006 5:27am
Quoting titikokatiting
hehe...thanks. what im gonna do is im gonna close all my position in both broker if im near my margin call so that i have lots of time to withdraw from my other account to transfer it to my other account. hehe...
well you will always lose the spread when closing positions...

if you do it 60 times a year, you lose 360 pips... if you dont close it =) full profit

but this will be discovered soon =)

as we speak about it =)
  • #33
  • Nov 29, 2006 5:35am Nov 29, 2006 5:35am
which currency pairs have the highest positive swaps, and also which pairs have the lowest volatility (so that possibly, my swap earnings can overtake my losses)? I'm only familiar with usd/jpy and usd/cad. but i think there are other currencies that will serve my hedge purpose better... can anyone please comment, thanks!

and, if i push on with this plan, i'll update you all how it's going
  • #34
  • Edited 6:13am Nov 29, 2006 6:00am | Edited 6:13am
Hi everybody!

ok, so lets make a simulation. We havr 2 acounts, each with $50k in it. One pays interest, second doesnt. Lets call "paying" account1 and "not paying interest" - account 2.

Lets take USDJPY and calculate interest rate per day for 1 lot (100k): roughtly $13.6.

Lets assume that we have a broker with 3 pips spread.

If we trade 10 lots = 1m, then we are using 1:20 leverage. each 1 pip value is around 100USD (a bit less on USDxxx). 100 pips are equal $10k. We can allow 80% account to be wiped out before margin call, i.e. 400pip move on losing account. (may vary depending on broker margin requirements)

Lets take 300 pips move a week average for USDJPY. And so, lets assume that each week the operation of
open -> close -> money transfer to losing account should be made.

Lets simulate one week:

1) Lets say price is at 110.00/03 for USDJPY on monday. We buy 10 lots (1m) @110.03 on account1, and now we have 1 million USD on account. We receive $136 every day as an interest. In one week price is 112.00/03 and we sell @112.00. Now we have earned an interest of 7 days, and +197 pips profit, which is equal around US$ 17590. Interest rate for 7 days = $953, which will total your balance on account1 to 68542 (50000+17590+953)

2) oposite on accout2 except for the interest rate and entry prices. When selling it will be @110.00, and when closing the trade, it will be @112.03. loss of 203 pips.
Balance should be $32410 (50000 - 17590). but this calculation is not exactly right - read on.

3) we withdraw the 17590 to your bank and wire money from there to the account2 (because some brokers will transfer the money when withdrawing only to your bank account and not directly to other broker account... and then, its not in your interest to show them you wire to other broker). So, if its all happening within the US, bank wire should not cost much (I dont know). Same for europe. But lets say, withdrawal + wire total $50.

We also add 6 pips to "expences" - because on account1 we made +197 pips, and on account2 we lost 203 pips. This will roughtly total to $600 bigger loss on losing account.

And so, if total expences will be around $650.

To sum up, "expcences" caused by spread and wire are totaling about $650, and interest rate profit is $953. Still we have $300 profit on our simulation. But lets not forget that price may move more than its average 300 pips a week, and also not a fact that the 2 brokers will have same quotation at execution time of the trade. Actually all brokers at any given time have 1-2 pip differences in quotation. This is usually ok. BUT each such 1 pip is equal $100 ...

this is the math

Any corrections?

Just my 2 coins

All the best,

Rezo


BTW, still holding long aussie
  • #35
  • Nov 29, 2006 6:04am Nov 29, 2006 6:04am
Quoting titikokatiting
which currency pairs have the highest positive swaps, and also which pairs have the lowest volatility
Usually, those that have highest difference in interest also have higher volatility and/or higher pip value. Am I wrong here? not 100% sure, but thats what I think.

Interest rates:

<table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"><td colspan="5">Major Central Banks Overview</td> </tr><tr class="mycssHeaderCol1"> <td>Central Bank</td><td>Next Meeting</td><td>Last Change</td><td>Current Interest Rate</td> </tr><tr> <td>Bank of Canada</td><td>05-Dec-06</td><td>24-May-06</td><td>4.25%</td> </tr><tr> <td>Bank of England</td><td>07-Dec-06</td><td>09-Nov-06</td><td>5.00%</td> </tr><tr> <td>Bank of Japan</td><td>16-Nov-06</td><td>14-Jul-06</td><td>0.25%</td> </tr><tr> <td>European Central Bank</td><td>07-Dec-06</td><td>05-Oct-06</td><td>3.25%</td> </tr><tr> <td>Federal Reserve</td><td>12-Dec-06</td><td>29-Jun-06</td><td>5.25%</td> </tr><tr> <td>Swiss National Bank</td><td>14-Dec-06</td><td>14-Sep-06</td><td>1.75%</td> </tr><tr> <td>The Reserve Bank of Australia </td><td>05-Dec-06</td><td>08-Nov-06</td><td>6.25%</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">Africa</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Egypt</td><td>8.25%</td><td>8.50%</td><td>22-Jan-06</td> </tr><tr> <td>South Africa</td><td>8.50%</td><td>8.00%</td><td>16-Oct-06</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">Asia Pacific</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Australia</td><td>6.25%</td><td>6.00%</td><td>08-Nov-06</td> </tr><tr> <td>China</td><td>5.85%</td><td>5.58%</td><td>27-Apr-06</td> </tr><tr> <td>Hong Kong SAR</td><td>6.75%</td><td>6.50%</td><td>30-Jun-06</td> </tr><tr> <td>India</td><td>7.25%</td><td>7.00%</td><td>25-Jul-06</td> </tr><tr> <td>Indonesia</td><td>10.25%</td><td>10.75%</td><td>07-Nov-06</td> </tr><tr> <td>Japan</td><td>0.25%</td><td>0.00%</td><td>14-Jul-06</td> </tr><tr> <td>Korea</td><td>4.00%</td><td>3.75%</td><td>09-Feb-06</td> </tr><tr> <td>New Zealand</td><td>7.25%</td><td>7.00%</td><td>08-Dec-05</td> </tr><tr> <td>Philippines</td><td>7.50%</td><td>7.25%</td><td>20-Oct-05</td> </tr><tr> <td>Singapore</td><td>1.38%</td><td>1.06%</td><td>01-Aug-04</td> </tr><tr> <td>Taiwan</td><td>2.25%</td><td>2.13%</td><td>22-Dec-05</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">Europe</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Czech Republic</td><td>2.50%</td><td>2.25%</td><td>27-Sep-06</td> </tr><tr> <td>Hungary</td><td>8.00%</td><td>7.75%</td><td>24-Oct-06</td> </tr><tr> <td>Iceland</td><td>14.00%</td><td>13.50%</td><td>14-Sep-06</td> </tr><tr> <td>Norway</td><td>3.25%</td><td>3.00%</td><td>01-Nov-06</td> </tr><tr> <td>Slovakia</td><td>4.75%</td><td>4.50%</td><td>26-Sep-06</td> </tr><tr> <td>Sweden</td><td>2.75%</td><td>2.50%</td><td>26-Oct-06</td> </tr><tr> <td>Switzerland</td><td>1.75%</td><td>1.50%</td><td>14-Sep-06</td> </tr><tr> <td>United Kingdom</td><td>5.00%</td><td>4.75%</td><td>09-Nov-06</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">Middle East</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Turkey</td><td>17.50%</td><td>17.25%</td><td>21-Jul-06</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">North America</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Canada</td><td>4.25%</td><td>4.00%</td><td>24-May-06</td> </tr><tr> <td>United States</td><td>5.25%</td><td>5.00%</td><td>29-Jun-06</td> </tr> </tbody> </table> <!-- FI ENGINY INTEREST RATES -->
<!-- INICI ENGINY INTEREST RATES --> <table class="mycssTable1" width="450"> <tbody><tr class="mycssHeaderCol2"> <td colspan="5">South America</td> </tr><tr class="mycssHeaderCol1"> <td>Country</td><td>Current Interest Rate</td><td>Previous</td><td>Last Change</td> </tr><tr> <td>Brazil</td><td>13.75%</td><td>14.50%</td><td>18-Oct-06</td></tr></tbody> </table>
  • #36
  • Nov 29, 2006 6:31am Nov 29, 2006 6:31am
Quoting Rezo
Hi everybody!

ok, so lets make a simulation. We havr 2 acounts, each with $50k in it. One pays interest, second doesnt. Lets call "paying" account1 and "not paying interest" - account 2.

Lets take USDJPY and calculate interest rate per day for 1 lot (100k): roughtly $13.6.

Lets assume that we have a broker with 3 pips spread.

If we trade 10 lots = 1m, then we are using 1:20 leverage. each 1 pip value is around 100USD (a bit less on USDxxx). 100 pips are equal $10k. We can allow 80% account to be wiped out before margin call, i.e. 400pip move on losing account. (may vary depending on broker margin requirements)

Lets take 300 pips move a week average for USDJPY. And so, lets assume that each week the operation of open-close-money transfer to losing account should be made.

Lets simulate one week:

1) Lets say price is at 110.00/03 for USDJPY on monday. We buy 10 lots (1m) @110.03 on account1, and now we have 1 million USD on account. We receive $136 every day as an interest. In one week price is 112.00/03 and we sell @112.00. Now we have earned an interest of 7 days, and +197 pips profit, which is equal around US$ 17590. Interest rate for 7 days = $953, which will total your balance on account1 to 68542 (50000+17590+953)

2) oposite on accout2 except for the interest rate and entry prices. When selling it will be @110.00, and when closing the trade, it will be @112.03. loss of 203 pips.
Balance should be $32410 (50000 - 17590). but this calculation is not exactly right - read on.

3) we withdraw the 17590 to your bank and wire money from there to the account2 (because some brokers will transfer the money when withdrawing only to your bank account and not directly to other broker account... and then, its not in your interest to show them you wire to other broker). So, if its all happening within the US, bank wire should not cost much (I dont know). Same for europe. But lets say, withdrawal + wire total $50.

We also add 6 pips to "expences" - because on account1 we made +197 pips, and on account2 we lost 203 pips. This will roughtly total to $600 bigger loss on losing account.

And so, if total expences will be around $650.

To sum up, "expcences" caused by spread and wire are totaling about $650, and interest rate profit is $953. Still we have $300 profit on our simulation. But lets not forget that price may move more than its average 300 pips a week, and also not a fact that the 2 brokers will have same quotation at execution time of the trade. Actually all brokers at any given time have 1-2 pip differences in quotation. This is usually ok. BUT each such 1 pip is equal $100 ...

this is the math

Any corrections?

Just my 2 coins

All the best,

Rezo


BTW, still holding long aussie

Thanks for the computation. actually, i reviewed the behavior of USD JPY in the monthly graph, the average size of a whole candlestick is about 300 pips per month, meaning, i dont have to close the position very often since my account can take 450 pips, the 2 brokers that im gonna use has a spread of 2 pips and the other has a spread of 1 pip. meaning that 300 dollars will be my expenses on the first order. then when i look at them, the two brokers has a difference of 200 hundred dollars, sometimes 100 dollars. when the time comes that i want to close my position, usually, will happen may be once a month or maybe once every 2 months, before i will close it, i'll see to it that the 2 brokers will have more or less have identical price or lets say 200 dollars difference. in a month, the interest of $2700 earnings, you can deduct all the expenses, of (500 dollars) wire transfer in our country is 20 dollars, so 80 dollars each broker, or total of $ 160, i think i will still earn around 2000 dollars, which is 2 % of my total investment. what do you think?
  • #37
  • Nov 29, 2006 6:37am Nov 29, 2006 6:37am
Quoting cgldsmth
there's a hedgeEA on the forex-TSD forum which hedges GPYJPY(long) against CHFJPY(short) and collects the large swap difference. I've had a bit of success with it on demo. Uses a clever correlation and bollinger logic.
whats do you mean "hedgeEA on the forex TSD forum" where is that?
  • #38
  • Nov 29, 2006 6:40am Nov 29, 2006 6:40am
Quoting titikokatiting
whats do you mean "hedgeEA on the forex TSD forum" where is that?
www.forex-tsd.com

search for "hedge EA" to find the thread
TRADE FOR SWAP
  • #39
  • Nov 29, 2006 6:57am Nov 29, 2006 6:57am
Quoting titikokatiting
which is 2 % of my total investment. what do you think?
2% is a good result. all I can say is good luck!

bus still:

about monthly candle - look at the weekly, because if it moves 2 times 300 pips a week... for eg: last december we had 600 pip candle in one week on USDJPY. Ranging markets whould be prefoect conditions for you.

and be careful with broker to get "same quotes".

other than that - I only wish you good luck!

Rezo
  • #40
  • Nov 29, 2006 6:59am Nov 29, 2006 6:59am
titikokatiting - EVERYTHING you described above is a sure way to loose .

- interest rate - is just silly - sounds like you a begginer, emotions and forex will swallow your $100000

-hedging strategies with option and futures - seriously, read up on it - major hedge funds screw this up - and they do this for living

sorry for not elaborating, but i just woke up - maybe a bit later(plenty info on the net, look it up just not from brokers)

overall if you have a spare $100000 - why not trade without margin with a bank directly(i.e. UBS and alot more options) - alot safer and easier to make $3000 a month than lose it through complecated strategies with a good for nothing broker that your are talking about.

best,
Steve
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