Rollover Interest

Hello,

I would like to know how to calculate the interest on a trade carried overnight, e.g the other day I went long 0.1 lot USD/JPY and got $ 4.10 as interest.

I know its calculated from the interest differential of the two countries involved, but does anyone have a formula, so that I can know in advance how much interest I will gain/pay whenever I leave a position overnight.


Thanks

I'm not sure how it's calculated but i use cmsfx and you can bring up a chart that will tell you exactly how much interest you will receive or be deducted. Don't know if all brokers do this.

The formula is this:

Notional value x (base currency interst rate - quote currency interest rate) / (days in year x conversion to USD)

The US has a rate of 5.25% and JPY has a rate of 0.25%. In the USDJPY pair the USD is the base and the JPY is the quote or "counter". Notiional value is the contract size of your trade.

100,000 x (5.25% - 0.25%) / 365 days = 5000/365 =$13.69

Note that is you were doing this for a pair where the USD was not the base currency you would also have to divide by the conversion to USD as expressed in the original formula.

This is the standard calculation. Oanda calculates interest to the second (i think) so this formula will not be exact for them. Most brokers have an online calculator to show the swap rates. It's also important to note that many brokers keep a little for themsleves so it's unlikely that you will realize the true swap rate when it is in your favor. Rest assured, when you owe the swap you will pay every last penny.

By the way posterx, welcome to Forex Factory.

Thanks for the explanation philmcgrew.