If the interests cancel each other out, then I have nothing to worry about... I am not interested in making profits from the interest in the first place if you have read my first post ..I just want the spot FX and future spread of 40+pips to narrow. You need to re-read PARISJOM post before you WRITE this one. That is the answer. Contango/backwardation. PARISJOM is the only one who reads before he writes
Research, "The forward premium puzzle." Also as a primer: http://64.233.161.104/search?q=cach...ncy+futures+and+spot&hl=en&gl=us&ct=clnk&cd=2
How's bout this-- Forget trying to find a sure thing trade--you can accomplish that with CD's. Instead, why not learn how to trade directionally. Newbies I guess have to go through this phase or age of enlightenment and seasoning it appears. Just cut your newbie period short and learn to trade now instead of looking for tricks that milions have already looked at and then realized it was wrongheaded.
Sigh. The interest differential is the only reason there is any premium/discount to the futures in the first place. The spread will always narrow and close by expiration. There is no edge in "betting" on the spread to close, you might as well just go long or go short the spot for the interest credit, if all you are looking for is that "40+ pips to narrow". Get it now? Sell EUR against USD spot, and by december you will earn 40+ pips in interest since USD rates are higher than EUR -- you don't have to bother with the futures. Of course you will be exposed to exchange rate fluctuations, but that is a whole other story.
Maybe I was not clear in the first place, or maybe I am missing something ? short eur/usd spot will gain interest. long eur/usd futures will decrease in value over time proportionaly to the interest gained on the short eur/usd spot position. .... short eur/usd spot + long eur/usd futures is about as usefull as oppening 2 bank accounts in the hope of doubling your interest ... just doesn't work quite like that.
Oh, and did I mention long eur/usd spot + short eur/usd futures = zero market exposure ? Did I need to mention that ? ... I certainly hope that was obvious in everybody's mind.
Right. Also, remember that words like 'Contango' and 'Backwardation' still exist, but sometimes are not as obvious as those in physical commodities. There are frequent divergences between GLOBEX EC/E6 and EUR/USD Interbank. People like TradeLink and GetCo (props) are fully on to this. Just like the short end yield futures - cash NOW v market FUTURE. There's always a difference to be exploited, especially with a less formal market like OTC FX.
That's exactly the point. I am looking for strategies that are close to zero market exposure (not necessary zero) but at the same time balance by risk/opportunities that oscillate for a swing trade. (If possible, any kind of spreads even between 3 pairs/trios that widens and close in less than a month).
Bank CD's are about 5-6% per YEAR.... Are there any strategies that gives at least 1%/month? (with >95% chance without pure directional trade; partial directional or spreads are fine)