Futures currency / Spot currency spread trading

Discussion in 'Strategy Building' started by smiley486, Sep 23, 2008.

  1. I didn't really. The chart on TOS showed that a spread between the AUD spot minus the futures actually jumped from around .0004 pips to .0093 and has been slowly ebbing back to zero.

    <a href="http://www.flickr.com/photos/johnnyvenom/2887046292/" title="audspot minus aud futures by siliconjohnny, on Flickr"><img src="http://farm4.static.flickr.com/3206/2887046292_bfa612d589_b.jpg" width="1024" height="684" alt="audspot minus aud futures" /></a>
    #21     Sep 25, 2008
  2. No really clear troughs and valleys.

    Was there a futures expiry when it went to 0?

    Do you think there is a viable method here for making money?

    #22     Sep 25, 2008
  3. Well, it's been a week, let's see how we've done. Now originally this was to be held for a whole seven days, but the FX side recieved a margin call and so I closed that out.

    We opened the trade on 9/24/08 going long 100,000 units of AUD/USD @ .8305, and shorted one lot of AUD futures @ .8296

    This morning I received a margin notice on the FX side, so I closed it out. Just as well, it had been 5 days, so that should be sufficient enough to see how a trade would last a "week."

    So we closed out today, 9/29/08,
    closed the AUD spot @ .8127, and the AUD futures @ .8079. The spot lost 178 pips, while the futures gained us 217 pips, for a net of 39 pips or $390. Interest earned, using the calculator provided in the link previously posted, on a position held shy of 5 days is about $48.50.

    Now over the past couple days, I should note that despite their high correlation, one or the other often showed a loss/gain higher than the other. There is a risk that, if one were to do this to earn earn interest and hope that one position offsets the other, that interest earned will not be offset by a potential loss from positions. I guess one has to establish a spread chart between the two and take advantage of the trend that would best correspond to trying to earn interest.
    #23     Sep 29, 2008
  4. It seems that the potential to make money from these trades certainly exists for retail traders, but seems limited unless you have a broker that offers the trade as a 'spread trade' rather than having to front up full margin for both legs.
    #24     Sep 29, 2008
  5. Very interesting. Which broker do you use? Was there a particular reason you entered when spread was 46?
    #25     Sep 29, 2008
  6. By putting this on you are trading a swap. Be careful, forward points have been all over the place lately making this not as risk adverse as you might think.
    #26     Sep 29, 2008