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Arbitrage with no-interest broker

  • #101
  • Dec 16, 2006 11:01pm Dec 16, 2006 11:01pm
i'll keep you posted, tnx!



Quoting howard
Please keep us posted in any event, it is an interesting subject.

Thanks a lot

howard
  • #102
  • Dec 18, 2006 5:13pm Dec 18, 2006 5:13pm
Quoting titikokatiting
1994 to 1998, gbp/jpy went up then 1998 to 2000 , it went down, and from 2000 to 2006 its going up, dont want to take chances here, next year, might go down, so might as well just hedge it with a non swap broker, your still gonna earn around 6000 dollars per month on a 10 lot position without the risk.
i dont understand your strategy. if u hedge gj, ofcourse u gonna gain interest by long gbp/jpy but the thing is u gonna be charged more in the short gbp/jpy post. so in total, the amount gain is negative. how would u say u gonna earn aroung $6k per month on a 10lot position?
  • #103
  • Dec 18, 2006 5:20pm Dec 18, 2006 5:20pm
think,i found really holy grail,its indictor iam calling crystal ball,i won,t annonce about it recentlly .i do have to test more,150 pips within 2days best regards
  • #104
  • Dec 19, 2006 8:20am Dec 19, 2006 8:20am
Quoting nurhazeerah
i dont understand your strategy. if u hedge gj, ofcourse u gonna gain interest by long gbp/jpy but the thing is u gonna be charged more in the short gbp/jpy post. so in total, the amount gain is negative. how would u say u gonna earn aroung $6k per month on a 10lot position?
make a short position on a non swap broker. you need 2 brokers here in order to work.=)
  • #105
  • Dec 19, 2006 12:56pm Dec 19, 2006 12:56pm
I wonder how we can hedge position with futures... I just looked at the SaxoTrader and GBP/JPY MAR futures are priced at around 227.5 while the forex rate is around 232.0. So how would you hedge when there is such a differesnce? Probably the up/down moves are not coordinated too. This would definately no be like using 2 forex brokers (1 regular, other int. free).
  • #106
  • Dec 20, 2006 11:14am Dec 20, 2006 11:14am
Quoting fastbusiness
I wonder how we can hedge position with futures... I just looked at the SaxoTrader and GBP/JPY MAR futures are priced at around 227.5 while the forex rate is around 232.0. So how would you hedge when there is such a differesnce? Probably the up/down moves are not coordinated too. This would definately no be like using 2 forex brokers (1 regular, other int. free).
In fact it is much better to place both positions on one platform and one account, as the hassle of transferring funds between the accounts does not exist.
In the above case it is even better as the futures are traded at a discount as you mention, because you want to short it, on expiry in March futures will be traded at the same level as cash.

However you have to check the tick value of the cash and futures to see if they cancel each other , and that is very easy just write down both prices once a day and see what happens after a period of time. If there is not a balance between them you should change the ratio.

howard
Regards
  • #107
  • Dec 20, 2006 11:53am Dec 20, 2006 11:53am
That's what I'm doing right now. I have opened demo at Saxo Bank. Than I opened one long euro fx futures contract (125.000) and shorted the same amount eur/usd at the spot market. For holding short position in the spot market I receive around $6 rollover a day. But there is one problem, there is a difference in tics on spot and futures market. The biggest difference I have noticed was some 10 pips. (eur/usd was 0.08% UP, and on futures it was just 0.01% UP). But usually they are nicely coordinated. I just need to keep testing this to see how the things are going. Demo lasts for 30 days, so lets just wait and see. I should have $180 extra money at the account expiration date. When I subtract the spread and commissions I shall have around $120 left. But as I said, let's wait and see.
  • #108
  • Dec 20, 2006 3:27pm Dec 20, 2006 3:27pm
Quoting fastbusiness
That's what I'm doing right now. I have opened demo at Saxo Bank. Than I opened one long euro fx futures contract (125.000) and shorted the same amount eur/usd at the spot market. For holding short position in the spot market I receive around $6 rollover a day. But there is one problem, there is a difference in tics on spot and futures market. The biggest difference I have noticed was some 10 pips. (eur/usd was 0.08% UP, and on futures it was just 0.01% UP). But usually they are nicely coordinated. I just need to keep testing this to see how the things are going. Demo lasts for 30 days, so lets just wait and see. I should have $180 extra money at the account expiration date. When I subtract the spread and commissions I shall have around $120 left. But as I said, let's wait and see.
keep us posted of the results
Regards
  • #109
  • Dec 22, 2006 12:31pm Dec 22, 2006 12:31pm
These are the results of my research through 2006:

1. Collecting interest on one account and avoiding to pay on another is not possible. Reason: There is no broker out there that would let you do this. I spoke with 5 different interest free account representatives. IT IS NOT POSSIBLE.

2. Hedging fx position with fx options does nothing. Reason: Premium that you pay is much greater than interest you would receive.

3. Doing a cross currency hedge ain't gonna happen. Reason: Pure gambling.

4. And finally, hedging with fx futures is impossible. Interest is already built into the price.

Conclusion: I have learned in 2006 that THERE IS NO FREE LUNCH, and that only big guys make money in the markets and the ones with inside info.

If you ask me, I learned enough.
  • #110
  • Dec 22, 2006 1:19pm Dec 22, 2006 1:19pm
In reference to your first point. When you said there are no brokers out there that will do this do you mean there are no brokers who will not charge interest. Aren't there no swap brokers as discussed earlier in this thread?

Quoting fastbusiness
These are the results of my research through 2006:

1. Collecting interest on one account and avoiding to pay on another is not possible. Reason: There is no broker out there that would let you do this. I spoke with 5 different interest free account representatives. IT IS NOT POSSIBLE.

2. Hedging fx position with fx options does nothing. Reason: Premium that you pay is much greater than interest you would receive.

3. Doing a cross currency hedge ain't gonna happen. Reason: Pure gambling.

4. And finally, hedging with fx futures is impossible. Interest is already built into the price.

Conclusion: I have learned in 2006 that THERE IS NO FREE LUNCH, and that only big guys make money in the markets and the ones with inside info.

If you ask me, I learned enough.
Taking Life One Pip At A Time I officially have my own opinion.
  • #111
  • Dec 22, 2006 3:32pm Dec 22, 2006 3:32pm
Quote
3. Doing a cross currency hedge ain't gonna happen. Reason: Pure gambling.

Sorry Fastbusiness, but I don't quite agree with you there.

I sat on a cross currency hedge for 7 months this year and it doubled my account.

Pure gambling it was not.

A lot of research was invloved before and during the trade, but in the end it worked out very well.
Maybe I was just lucky, who knows.
Ever alert for the call to action!!
  • #112
  • Dec 23, 2006 5:04am Dec 23, 2006 5:04am
@MikeC:

There are brokers out there that will give you swap free account, no doubt about that. There is just one little problem, as soon as you open your gbp/jpy long position and start collecting $24/day on a standard lot, they will ask you what the hell are you doing back there?! Follows, your account closing and maybe something worse..
I too, when started my quest for risk free money, believed that this is indeed a Holy Grail.. Than it turned out I was wrong.

@LumoX:

Nice, doubling account in 7 months is a great success. I was personally referring to the threads subject "Holy Grail", which means something perfect without a risk. And correlation between currency pairs is not something that we can predict that easily. But that again, I was too, very interested about cross currency hedge not so long ago.. Who knows, maybe I go back and give it a try once again.
  • #113
  • Dec 23, 2006 5:53am Dec 23, 2006 5:53am
fastbusiness, dude you have learned enough but not that enough to discard swap trading all together.

Im not sure if im allowed to say the broker name..Oanda for one encourges carry trade and there are specific threads in for carry trade and one guy perticularly Interesthawk over the year has earned practically from swap trading and he has proved with the his boxes.

Forget about being on the wroung side and finding interest free broker to hedge or futures or options etc.. you can do carry trade on being right side of trade.

You can think of carry trade with what you have..not with what you gonna have.

Your target must be for one year, not months and weeks and get prepared to get on with the old old old cliche..be prepared to play how much you wanna loose.

Its the greed that will kill you not the negative pips or the broker. if you have thousand dollars to pay..think about it as a losing cash.

You can only play with losing money in swap game..not your hard earned money.

if you think like that..the swap game becomes beautiful.

The rule of the game is GO WITH THE BIG BOYS.

Over the years, I found out that if you apply the same decipline and a strict money management in swap..it will be more profitable that intraday trading.
  • #114
  • Dec 23, 2006 6:29am Dec 23, 2006 6:29am
Here's an idea.... you could use the pyramid described on my signature link to compound a huge exposure to a high interest pair. Let's say the NZD/JPY goes into recession one day and hits its alltime low. I don't know about you guys, but I'm buying and then pyramiding because I can expose myself very large with a very small upfront investment.


PS) The "original" cash and carry thread from back in the day.... http://www.forexfactory.com/forexfor...8&page=1&pp=15

R.I.P. lol

-Tom
  • #115
  • Dec 23, 2006 6:38am Dec 23, 2006 6:38am
Quote
I was personally referring to the threads subject "Holy Grail", which means something perfect without a risk.

Fair point fastbusiness, there was risk associated with that trade.

Back onto topic then, the only 'free lunch' I know of is the multiple days interest payment as outlined by passholder here...
http://www.forexfactory.com/forexfor...ad.php?t=11561

Theoretically possible on one of very few days when fxcm offers 'holiday' interest payments.
Ever alert for the call to action!!
  • #116
  • Dec 23, 2006 7:38am Dec 23, 2006 7:38am
thanks



Quoting fastbusiness
I wonder how we can hedge position with futures... I just looked at the SaxoTrader and GBP/JPY MAR futures are priced at around 227.5 while the forex rate is around 232.0. So how would you hedge when there is such a differesnce? Probably the up/down moves are not coordinated too. This would definately no be like using 2 forex brokers (1 regular, other int. free).
  • #117
  • Dec 23, 2006 12:35pm Dec 23, 2006 12:35pm
hello i want to take advantage of nzd interest rate currently at 7.25 percent ,is there a way i can hedge the currency to avoid risk of the currency falling?

the only thing available on my trading account are march futures but i dont have gbp/nzd pair.would it be worth it after costs?

i mean after tax uk is payin about 4.4 percent i bet after tax nzd still pays alot more.

ian pearson
  • #118
  • Dec 23, 2006 1:13pm Dec 23, 2006 1:13pm
LumoX, which pairs you have used in cross hedging. I just spent some time looking and comparing gbp/jpy and eur/jpy charts. By the way, these two have almost perfect correlation (coefficient is well over 0.9). So, they are moving in the same direction, they have the same pip value. But the rate for gbp/jpy moves differently than the eur/jpys. For example, first pair makes 100 pips move, and second just 70. Now, I now that somebody would say to open 1.7 times bigger position on eur/jpy. Ok, but what would you do when next week gbp/jpy make 100 pip move and eur/jpy 40? And so on.. I think you get the point.
  • #119
  • Dec 23, 2006 3:26pm Dec 23, 2006 3:26pm
Fastbusiness,

That didn't take much to talk you round!!

I personally used GbpJpy for the primary interest gathering pair. As for the secondary 'hedging' pair....
I think that has to be your own choice.
You have to find the right compromise (for you) between correlation and interest payments.

Just go through all the Jpy backed currencies, which ones offer the lowest interest payments and which ones offer the greatest correlation to GbpJpy?

As far as movements go, it all depends how long you're planning to stay in the trade for. No two currencies are going to be perfectly matched.
As long as your trade can withstand movements the two currencies make at their worst moments, then you'll carry on collecting interest.

Your comment on offsetting the hedge - by 1.7 as you suggested, don't forget that you will then be paying 1.7 times as much interest for the secondary hedged pair. Once again, that has to be your choice that you make from your research.

I'm sorry for not spelling out exactly what I did, but in my opinion you'll be far happier if you do the research yourself.
After all, it's gonna be you that has to sit there and watch your account equity go up and down for a long period of time without you hitting the exit button!!
Ever alert for the call to action!!
  • #120
  • Dec 24, 2006 12:46am Dec 24, 2006 12:46am
tdion...Great...Preciselly what the doc. ordered.

Carry trade should be looked into an yearly trade prospect than daily or monthly.

JP morgan et all have 2 trillion dollars on carry trade..the whole world economy is run on carry trade.

Japan is the sole provider of global liquidity.

Its a very very serious subject when interest rate hike comes for YEN than its for dollar.

Even, with a 0.25 points increase, the market will shake up..but as seen earlier this year, the market comes back to normal.

So, if you want to carry trade forget about the hedge..you are wasting your money there looking at zero interest hedge..just put that money "Bravelly" in the interest trade and Pyramid it. the risk will be for first six months..but with the extra interest and compounding you get ..you would very well cover up the 1000 PIPS dooms day buffer scenario easily for the next six months and after.

The whole world will tumble if Japanese decides to increase the interest rate to say 2 or 3 percent, they would do so eventually but very very slowlly in two or three years time....by this..the caryy trade will adjust to the shake up.

Japan is an export oriented economy..they will never commit a harikari..by increasing the rates substantialy...they would do it very very slow...incase the inflation heeats up..but they would ensure that the carry trade does not get efected.

The chance of losing a carry trade is very less compare to the daily loss we suffer intraday
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