help on hedging usdcad currency.

Discussion in 'Trading' started by thelost, Jan 24, 2008.

  1. thelost


    i want to start trading. i can get $25,000 canadian but i am afraid of converting to usd to start trading because i am worried about the us dollar.

    can someone advise me on how best to hedge the currency risk? or direct me to online resources or books about hedging.

  2. if you are DAYTRADING with someone like IB, you can select CAD as your 'base' currency and trade all the USD stocks you want....

    when you buy a USD stock you will be 'short' USD against the is up to you to convert your CAD to USD to cover the currency defecit for that position.

    if you fail to do this then you will be charged interest on the USD defecit...however if you are closing out all of your positions by the end of the day, then you will have no USD defecit overnight, and will not pay any interest....hence you can trade USD stocks without holding USD.
  3. if you are not DAYTRADING, you can buy options or futures contracts which would allow you to hedge your exposure...i'm not sure what the Montreal Exchange has in the way of derrivatives, but i'm pretty sure the CME contract is too big for a 25k CAD account.

    check the Montreal Exchange website, the CME website, do some reading about futures and options.

    good luck
  4. thelost


    i see. i was planning to use IB and close out positions by eod. i will have to look into this. thanks for the information.