Author Topic: currency risk  (Read 12506 times)

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Offline Gary Stone

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Re: currency risk
« Reply #15 on: 29/04/2014, 12:12:43 PM »
To all USA Equities investors,

On 7th March a USD hedge position was opened where I went long the AUD; see the following link for the Forum post that discussed this:

http://www.sharewealthsystems.com/forum/index.php/topic,2637.msg13357.html#msg13357

Overnight the exit conditions for this long AUD position were met so the position was closed this morning registering a hedge profit of US$1,444 or A$1,556 to offset the the strengthening of the AUD over this period.

Regards
Gary
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Offline Andrew A

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Re: currency risk
« Reply #16 on: 01/05/2014, 12:15:05 PM »
Hi Gary

I read the Journal post today re AUDUSD and your comment re looking for an exit of your hedge based on a SIROC signal. Per the hedging approach in the February Nasdaq Webinar, would you already have had a sell signal on the 28/4 using 34:18 & EMA13?

Regards
Andrew

Offline Gary Stone

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Re: currency risk
« Reply #17 on: 01/05/2014, 12:53:55 PM »
Andrew,

Yes. Exited the hedge trade on Tuesday as per the post above yours.

Gary
On the journey

Offline Andrew A

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Re: currency risk
« Reply #18 on: 01/05/2014, 03:08:33 PM »
Thanks Gary

Offline ivan

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Re: currency risk
« Reply #19 on: 12/06/2014, 11:13:24 AM »
HI Gary,

just wanted to check with you, are we close to opening another AUD/USD hedge ?  There is a swing high at 0.9408, if that gets taken out is that the entry ?

regards
Ivan

Offline Gary Stone

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Re: currency risk
« Reply #20 on: 12/06/2014, 01:59:29 PM »
Ivan,

If the AUDUSD CLOSES above 0.9408.

Regards
Gary
On the journey

Offline Adam Young

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Re: currency risk
« Reply #21 on: 12/06/2014, 11:28:49 PM »
Gary,

Is there any reason you prefer CFD's for hedging currency exposure to currency futures?

For anyone interested who is not familiar with currency futures:

The 6A is worth about $100K/ contract, and there is even the M6A for 10K/contract (though the liquidity there is not very good and the spread is 2 -3 ticks in the slow periods). You only pay 1 tick in the bid ask spread, commission is cheap ($5.00 or so/contract), and it is a fully regulated and carried on the Globex platform, so no broker side manipulations. Plus it is 24H and liquid enough to open and close whenever you like.

thanks,

Adam

Offline Gary Stone

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Re: currency risk
« Reply #22 on: 12/06/2014, 11:54:50 PM »
Adam,

Only because of divisibility for smaller portfolio values. The CFD that I use is of the Futures contract.

What is the margin requirement for the M6A?

Saxo don't appear to have this contract on the their platform for Globex contracts.

Regards
Gary
On the journey

Offline Ralph

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Re: currency risk
« Reply #23 on: 13/06/2014, 07:28:23 AM »
Why not buy the currency and get paid the interest whilst you are holding it.
If you buy the au/usd you get paid daily interest plus double interest for the rollover
It's not your aptitude but your attitude that determines your altitude!!!!!!

Offline Adam Young

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Re: currency risk
« Reply #24 on: 13/06/2014, 09:18:22 AM »
Gary, and All:

The M6A (micro Australian dollar futures contract) is a very thinly traded product, with somewhere around 2000 contracts a day turnover on average. That said, it is pegged to the 6A, so price is comparable, though you will often get 2 or 3 tick spread on the M6A, as opposed to 1 on the 6A.

I trade my futures products through a US based futures only broker who are absolutely the best brokerage I have ever dealt with (service/support/education wise). I only wish they carried equities as well.

Initial margin for 6A is $1650 USD (maintenance $1500 USD)
Contract Value: $100 000 AUD
Moves in ticks, each tick is worth $10 USD
Round turn brokerage (1 buy + 1 sell) : $6 USD

Initial margin for M6A is $165 USD (maintenance $150 USD)
Contract Value: $10 000 AUD
Moves in ticks, each tick is worth $1 USD
Round turn brokerage (1 buy + 1 sell) : I can't remember, but I think it is about $3 USD

Official contract rollover date from June to September was last night, 12/6/14 - so we are now trading the September contract (6AU4). Be aware that the June contract is still active until the 16th, dont buy it by mistake. There is an adjustment of -59 ticks between the June contract and September ( so dont get excited that you are getting the worlds cheapest price on the September contract - functionally they are the same).

Ralph, as I understand it, most brokers who carry US equites require accounts in USD only. Personally I trade these markets with IB and leave my cash in AUD and essentially borrow against it to buy the US shares. The interest they pay on the deposited AUD more than covers the cost of borrowing the USD, and makes life easier for me. If you need USD in your account to trade, then the only way you can buy AUD currency outright to hold is if you have additional capital. I like futures due to their leverage, liquidity, low cost, versatility and their regulation (and dnot like CFD's because their lack of many of the same features). Essentially I only have to allocate $1650 of my capital to get exposure to $100K of AUD, and I can continue to trade the rest of my capital.

Regards,

Adam

Offline Gary Stone

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Re: currency risk
« Reply #25 on: 13/06/2014, 09:36:20 AM »
Ralph,

You are referring to trading the spot AUDUSD rather than a Futures or CFD of Futures instrument.

At the moment interest rates are in favour of the AUD vs the USD because our interest rates are higher, however this may not always be the case over the long term.

Also, even though the official respective reserve bank rates may favour the carry trade for the AUD, FX providers take a margin which could still result in the trader paying interest rather than receiving interest. This will differ from one FX provider to another.

Regards
Gary
On the journey

Offline Gary Stone

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Re: currency risk
« Reply #26 on: 13/06/2014, 11:07:52 AM »
Thanks Adam.

So $165 per $10K for the mini and $1650 per $100K for the 6A.

Regards
Gary
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Offline Adam Young

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Re: currency risk
« Reply #27 on: 21/07/2014, 11:17:39 AM »
Gary,

With the 34:14 cross that just occurred, have you now closed the currency hedge you have been holding for the last couple of weeks, or are there additional confirmation signals you look for?

Thanks

Offline Gary Stone

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Re: currency risk
« Reply #28 on: 21/07/2014, 04:36:07 PM »
Adam,

Yes, closed the AUDUSD hedge position last week.

Regards
Gary
On the journey

Offline Adam Young

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Re: currency risk
« Reply #29 on: 08/09/2014, 08:57:30 AM »
Gary,

The 34:18 cross above, and the last close price above the last swing high as of end of day friday 5/9/14 is the entry signal for entering a hedge on the dollar again, if I am applying your methodology correctly. Is that right?

Thanks,

Adam