How to hedge the $USD?

Discussion in 'Trading' started by drukes1234, Sep 20, 2007.


  1. simple. Buy Crude Oil. Crude is pegged to the USD hence inversely correlated. Exit the trade when the peg is removed. As a Canadian trader you should have your account denominated in CAD. Otherwise get another broker who is able to do that.
     
    #21     Sep 24, 2007
  2. Could you elaborate on this, I don't get it? I understand that the individual hedge will follow a stochastic process but so will the value of the trading account. Therefore the net effect i.e hedge payoff, should be linear?
     
    #22     Sep 24, 2007
  3. No. Most brokers use 1:50 margin for forex. So shorting $35k worth of USD will use 2% margin = $700 margin.
     
    #23     Sep 24, 2007
  4. I called Interactive Brokers and they say I'm being charged 6% for my USD short... now this makes no sense for my hedge if I'm paying 6% a month on 40k
     
    #24     Sep 24, 2007
  5. gam1111

    gam1111

    commodities: gold, silver, copper, oil, wheat
     
    #25     Sep 24, 2007
  6. You are charged the ANNUAL INTEREST rate differential between the currency you're short and the one you're long. I am not sure what the carry is between CAD and USD but I doubt it's not 6% annually and definitely not MONTHLY!

    Of course, it can also mean you could receive interest depending on the carry.

    6% sounds about right for 1 year out USD puts 1 year out. But not for Forex spot long/short hedging. Did they quote you option prices?
     
    #26     Sep 24, 2007
  7. I called IB again and they said they charge 6% per year for the USD short... the hedge doesn't make much sense if I'm already 6% in the hole
     
    #27     Sep 24, 2007
  8. Daal

    Daal

    they dont pay interest on the first 10k but they do charge so this might be the reason
     
    #28     Sep 24, 2007
  9. I still don't get how this hedge will work if I'm spending 6% a year on interest
     
    #29     Sep 24, 2007
  10. Cutten

    Cutten

    If you are a daytrader or short-term trader, then just sell your USD for CAD. If you need USD in your account for some reason (e.g. you hold US stocks long-term) then use the CAD futures on the CME to hedge your exposure.

    After that, just make sure to convert your profits whenever they reach like $10k.
     
    #30     Sep 24, 2007