Hedging my EUR position in IB

Discussion in 'Interactive Brokers' started by Shawn B., Nov 17, 2007.

  1. Shawn B.

    Shawn B.

    Hi guys
    I live in Europe (using EUR), and I currently invest mostly in stocks for the long haul.

    Seeing the bad fate the dollar is facing I'm trying to remove the forex aspect, so I would basically need to hedge the dollar amount invested in stocks with EUR

    What's an efficient way of doing this in IB?
    ATM I'm short dollars and long EUR, but this eats up a lot of money because of IB interest spreads and the 10k - no interest - rule

    I could buy an EUR/USD future but the smallest amount is like 65k EUR and my portfolio is much smaller right now

    Any suggestion?
     
  2. teun

    teun

    One solution would be to find a cheap forex broker (maybe Oanda.com is an option?).

    Just deposit ~1000 euro and you can short the $ up to the amount you need.
     
  3. teun

    teun

    Another solution would be to delta hedge your $ exposure with options.

    I'm sure there are exchanges (like CME or Eurex) where eur/$ options are liquid enough to do this without much costs.
     
  4. HOBO

    HOBO

  5. teun

    teun

    This could be a solution. However, 2 questions remain:

    1) Does this ETF pay cash interest to the holder? It seems to follow the euro/$ exact so interest is obviously not re-invested.

    2) Obviously you need $ to buy this. When the OP has (for instance) $30.000 on his account which is all invested in US stock, he/she could only buy the FXE on margin which is costly (even with IB).
     
  6. Shawn B.

    Shawn B.

    The discussion is getting interesting :)
    I had thought about using a forex broker before, but this means:
    1- The 1000$ I move there are still "missing" from my stock trading account and
    2- If I use too high a leverage I might get a margin call (= bad slippage)

    I didn't know about EUR "stock", thanks for pointing that out!
    ATM maybe options on futures or on EUR stock might be the least capital-intensive solution, but I'm sure there are more ways..

    Keep posting your ideas, I'm sure a lot of people are in the same situation as me
     
  7. teun

    teun

    No, these are the options:

    Futures, options, ETF's and cash market.

    All existing futures (different exchanges) are too big. So the 3 others remain.

    There might be some some other (local) products existing (for example turbo's or speeders) but these behave essentially like options and you don't want to trade them because you mostly depend on quotes from the issuer.