EUR/USD account and interests earned with IB

Discussion in 'Interactive Brokers' started by MrBean, Jul 3, 2007.

  1. MrBean


    Hi all,
    I have an account in EUR denomination with IB and I want to daytrade US stocks and futures. Hope someone can answer my two simple questions:

    1. Which of the options a,b below is the least expensive way to daytrade USD denominated instruments with a EUR account?

    a) convert a chunk of the account into USD. I'd have to pay the bid/ask only once at conversion (plus there is a small commission), but I would incur in currency risk.

    b) keep the account in EUR and incur in the EUR/USD bid-ask spread at every transaction ( it is not clear to me from IB's website if they apply commissions in this case).

    2. If I have, say, 20k EUR and 30k USD in the account, do I get hit twice by the zero-interest threshold? In other words, is it correct that I will not be earning interest neither on the first 8k EUR nor on the first 10k USD?

  2. KS96


    If you only trade US$ denominated products,
    change your money once to US$ at IDEALPRO
    (not IDEAL). Keep all your money in 1 currency;
    yes you get hit by the no-interest threshold
    per currency.

    Also, it may help your margin requirements
    switching your base currency to US$.

    For every $125k you have, buy 1 EUR contract
    at Globex to neutralize your currency risk.
    Use no stops, and roll contracts forward
    as they expire.

    Can't make it any cheaper.
  3. MrBean


    Thanks for the reply. Is there any smaller sized EUR futures? Or any other way to hedge the currency risk for a 50k account?
  4. KS96


    There must be currency ETFs.... check e.g. FXE.
    I don't know whether this is suitable; no idea
    what's happening with the interest differentials.
    (You need to actually buy the ETF, so no interest
    on the money locked there?)

    But for only $50k I wouldn't care about the
    exchange risk. Just accept that you now have
    dollars. Especially at these EUR/USD levels,
    it should be safe in the longrun, no need to hedge
    (take the bet without a stop :D )
  5. MrBean


    Thanks. Also, apart from the no-interest threshold, is there any reason for your suggestion to keep only one currency?

    What is not clear to me is how margin works for a mixed currency account. Say I have 25k USD and 20k EUR cash, and I buy a 50k USD contract. Is there any currency conversion or does it go in the margin?
  6. KS96


    No other reason, but the no-interest may cost
    you, with current rates, up to around $500 per
    currency in interest per year. This should be

    As for your margin questions, check the IB pages.
    We can expand here forever...
    Simply remember that no conversions are taking
    place unless you initiate them. E.g. if you buy
    something in NZD but you have no NZD (but
    enough buying power in any currency), your NZD
    balance will get minus (and you will pay interest
    on that). For futures, any balance you have in
    any currency is marginable; no need to convert.
  7. rayl


    Another thought: If you transact mostly in USD securities, you should change your base currency to USD to increase margin leverage. If your base currency is EUR, you need 2% margin for the USD position on top of the margin calculation w/in USD securities.
  8. MrBean


    Thanks both of you for your input.
  9. I think ther epotentially is another reason. Not to sure what it is though..
  10. harry11


    IDEALPRO is easily the best..
    #10     Jul 6, 2007