How to get some yield if you have EUR account at IB

Discussion in 'Interactive Brokers' started by Tomaz26, Aug 3, 2019.

  1. Tomaz26



    is there a way to capture some 1% to 2% yield on IB account in EUR. Like for example BIL ETF which currently yields 2%+, but because my account is in EUR I could loose much more in EUR USD fluctuation. Sure I can also gain but this is then more gambling on the currency.. Or maybe if I buy BIL but borrow USD with some box options conversion? I think this was once explained how to borrow USD extremely cheaply with options, but I forgot how exactly this is executed and if this would even make sense.

    Because I mostly trade options or futures almost all of the time my cash just lays there and because it is a bit below 100.000 USD I do not earn any IB interest on this money.

    thanks for help :)

  2. luisHK


    U didn't get IB interest schedule quite right I m afraid. If you hold USD idle cash, u start getting paid over a balance of 10k USD, not 100k.
    Yet if u hold EUR cash nothing happens until 100k, but past that treshold, IB starts CHARGING you on that balance, not paying you.

    Besides I haven't found a way to get 1 or 2 % on euro, but curious to read more.
  3. Instead of holding EUR cash you could convert it to USD, then hedge with EURUSD futures or call options. Call options are an imperfect hedge, but can be very margin efficient if you go a little out of the money. This kind of setup doesn't get you USD rates on your EUR cash, you still pay the interest differential (approximately), but IB's spread is cut out.
  4. Short the EUR futures contract. You'll get 2.5% yield. And a USD exposure instead of the EUR
  5. Op doesn't want exposure. And if he did, buying USD outright is more effective than using futures.
  6. IB doesn't pay 2.5% but roughly 1.5% above 10k.
    This future does pay 2.5% from the first dollar.
    What is more effective?
  7. alexpun


    No exposure, no pay. You either take the exposure with the pay or take the negative interest holding the EUR.
    GregorySG9 likes this.
  8. OK, I think you are right for <100K EUR because of the threshold. But for larger amounts of cash I am right:

    If you look at the sept 2020 contract, it's currently yielding about 2.2% annualized which is roughly the spread between the USD and EUR rates.
    IB charges -0.83% on EUR cash.
    Total yield = 1.37%

    IB pays 1.64% on USD cash. Plus cash consumes no margin.

    If you have a debit balance in USD (e.g. holding USD stocks overnight), then USD cash is even more effective, because you will save the entire spread that IB charges.

    Again if you have a debit balance you can save the spread, which is a way to get paid. Convert EUR to USD, then hedge exposure with futs/options.
  9. I wouldn't there keep hundreds K of idle EUR cash in IB. Better to keep it a EUR bank account (where you pay no interest) and instant transfer to IB when you need. Or...
    Get another currency exposure like USD.
    Until USD rates become also negative ...
    #10     Aug 6, 2019