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carry trade vs dividends

  • #1
  • First Post: Jul 19, 2011 10:04pm Jul 19, 2011 10:04pm
carry trade vs dividends

what is easier to setup, say a basket of interest positive currency pairs? or pick out a few high yielding dividend stocks?
  • #2
  • Jul 19, 2011 11:37pm Jul 19, 2011 11:37pm
Quoting staffpro
carry trade vs dividends

what is easier to setup, say a basket of interest positive currency pairs? or pick out a few high yielding dividend stocks?
I think the answer is currency pairs:

 

  1. you have higher leverage in the currency market, thus can invest more money
  2. you get interest every day vs. dividends only once a year

but I might be wrong here. Not doing much stock investing here.

  • #3
  • Jul 20, 2011 4:37am Jul 20, 2011 4:37am
Quoting Custos
I think the answer is currency pairs:
[list=1][*]you have higher leverage in the currency market, thus can invest more money
i take it you never get trades wrong, so what's the flip side of high leverage?

  • #4
  • Jul 20, 2011 4:44am Jul 20, 2011 4:44am
the only positive i can see is interest is paid daily, however it's probably harder to time.

With stocks you could find some that pay monthly dividends, but in most cases its quarterly, easier to time as over the long term they trend up...

I've been trying to "trade" forex (paper trade) for 6 months now unsuccesfully, nothing really works for me.
  • #5
  • Jul 20, 2011 5:16am Jul 20, 2011 5:16am
Quoting >Apocalypto<
i take it you never get trades wrong, so what's the flip side of high leverage?

obviously you also need to get the direction right, but that's the same with stocks.

I thought the topic here was interest rate vs. dividends.

But apparently you know the topic better, so please elaborate more instead of giving bitchy comments.
  • #6
  • Jul 20, 2011 5:16am Jul 20, 2011 5:16am
Quoting staffpro
the only positive i can see is interest is paid daily, however it's probably harder to time.

With stocks you could find some that pay monthly dividends, but in most cases its quarterly, easier to time as over the long term they trend up...

I've been trying to "trade" forex (paper trade) for 6 months now unsuccesfully, nothing really works for me.
6 months is nothing.
  • #7
  • Jul 20, 2011 6:24am Jul 20, 2011 6:24am
Quoting Custos
obviously you also need to get the direction right, but that's the same with stocks.

I thought the topic here was interest rate vs. dividends.
so what's leverage got to do with that?
  • #8
  • Jul 20, 2011 6:32am Jul 20, 2011 6:32am
Quoting >Apocalypto<
so what's leverage got to do with that?
the higher the leverage, the less physical money I need to invest, pretty logical, no?

With the rest of my money I can do something else. The opportunity cost is greater with stocks.
  • #9
  • Jul 20, 2011 6:36am Jul 20, 2011 6:36am
my logic to choose stocks over forex is over the long term like 10 years lets say there is an upward bias meanwhile, interest rates will be changing, carry trades will unwind and i could be burnt badly... meanwhile on the stock side at the end of the day at least i still own the shares.
  • #10
  • Jul 20, 2011 6:45am Jul 20, 2011 6:45am
Quoting staffpro
my logic to choose stocks over forex is over the long term like 10 years lets say there is an upward bias meanwhile, interest rates will be changing, carry trades will unwind and i could be burnt badly... meanwhile on the stock side at the end of the day at least i still own the shares.
the upward bias is only for dividends, stock price increases are not anymore guaranteed. Gains can evaporate within days if there is a collapse, which is becoming more and more likely these days and more and more frequent.

Owning shares or owning money, what's the difference, with both vehicles I own something.
  • #11
  • Jul 20, 2011 7:03am Jul 20, 2011 7:03am
Quoting Custos
the higher the leverage, the less physical money I need to invest, pretty logical, no?

With the rest of my money I can do something else. The opportunity cost is greater with stocks.
high leverage on longer term buy and hold rarely works.... and you will be needing the rest of your money for margin calls.....

PS. you can buy stocks on margin.
  • #12
  • Jul 20, 2011 7:07am Jul 20, 2011 7:07am
Quoting Custos

Owning shares or owning money, what's the difference, with both vehicles I own something.
well if your both going long and shorting something at the same time, wouldn't that net out to not owning anything at all?
  • #13
  • Jul 20, 2011 7:14am Jul 20, 2011 7:14am
Quoting staffpro
well if your both going long and shorting something at the same time, wouldn't that net out to not owning anything at all?
what are you talking about? If I go long gbp/usd, I buy gbp and sell usd. Those are two different currencies. I don't go short and long the same currencies.
In that case I own gbp against usd.
  • #14
  • Jul 20, 2011 7:16am Jul 20, 2011 7:16am
Quoting >Apocalypto<
high leverage on longer term buy and hold rarely works.... and you will be needing the rest of your money for margin calls.....

PS. you can buy stocks on margin.
that may be, of course if you have no exit plan, then leverage kills you. I am aware of the stocks on margin thing, but as you are probably aware, the leverage there is max 2 times your capital.
  • #15
  • Jul 20, 2011 7:17am Jul 20, 2011 7:17am
Quoting Custos
what are you talking about? If I go long gbp/usd, I buy gbp and sell usd. Those are two different currencies. I don't go short and long the same currencies.
In that case I own gbp against usd.
yea in your account you have a long gbp position and you also have a short usd position of the equivalent value... so net net you really dont own anything sort of.
  • #16
  • Jul 20, 2011 7:20am Jul 20, 2011 7:20am
Quoting staffpro
yea in your account you have a long gbp position and you also have a short usd position of the equivalent value... so net net you really dont own anything sort of.
you own the pair gbp/usd.

If you buy a 100 shares of stock for $ 1000, you are long 100 shares and short 1000 $. You sold your 1000$ to buy 100 shares.

Same thing in any transaction. You are always something short and something long.
  • #17
  • Jul 20, 2011 7:25am Jul 20, 2011 7:25am
fair enough, although im still not convinced forex is the safer route.
  • #18
  • Jul 20, 2011 7:26am Jul 20, 2011 7:26am
Quoting staffpro
fair enough, although im still not convinced forex is the safer route.
yeah that I am also not sure of, just my belief right now, which might change in the future.
  • #19
  • Jul 21, 2011 7:57am Jul 21, 2011 7:57am
These are really different things... You may lose everything on FOREX, but you have some assets behind the shares. Dividents are less risky, I think.
go go go
  • #20
  • Last Post: Dec 20, 2016 10:05pm Dec 20, 2016 10:05pm
Carry trade is way more difficult and diecy that the safe and reliable dividend stocks
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