Spare Euros in a IB account

Discussion in 'Trading' started by Nym, Jun 29, 2012.

  1. Nym


    what would you recommend for "parking" a some spare Euros using IB?

    The account is in EUR and I would like "to keep the soldier at home" (i.e. long on EUR).

    Any idea?
  2. luisHK


    I have a similar issue although the account base currency is USD, and couldn't find much... but I do convert enough EUR into CHF to pay the margin for long eurchf futures - which I find slightly better than beeing simply long euro. It saves on the interest rates IB charges on the CHF margin requirement.

    Anyway I'm curious on reading of more ways to get any small return on my euro cash .
  3. Nym


    maybe a naif question but why do you consider eru.chf futures a good parking for spare euro?

    I look a bit into this issue and I found a few ETF

    maybe some that replicate a bond index can be considered safe until there will be a change of interest rate.

    Also I found some bonds "Republic of Italy" quoted in dollars with expiration time 2013. I am not very familiar with this instrument, and i do not quite follow why italians bonds are quoted in dollars. Anyway this may fit to your case as your base currency is USD.

    Any other suggestion is more then welcome
  4. luisHK


    I feel the 1.20 floor decided by the SNB is pretty safe at the moment (although there is no guarantee it won't break) and trading through IB I get a much better carry through RF (eurchf futures) than through spot forex. You could buy the september futures at around 20pips discount 2 weeks ago, and today they're selling around 1.998 for a spot price of 1.2012. If you're not familiar with futures, RFsep will reach expiration date at the same level of the spot price, and your account will pocket the discount at which you bought the futures.

    as long as you buy when eurchf is around 1.201 (I add when it goes below) - and as long the SNB is defending the floor, you're basically long EUR against all currencies + specifically long EURCHF + long the carry.

    If the ECB lowers its interest rate this week, the carry should become less favorable on eurchf though (if I got this right). Also I do leverage this futures position a bit, which you might not be interested in.

    Spot eurchf holding overnight is a disaster with IB due to the way IB calculates the interest rates on currencies.

    As of ETF I should probably have a closer look at the list you provided, but I neither like the commissions on euro denominated ETF/stock products nor feel confortable investing in european markets.
  5. Nym


    thx for the tips,
    I agree with you that SNB looks "solid" and yours is a nice strategy. Maybe you can protect yourself with an option in case you drop of confidence.

    if i find something else i will let you know!
  6. people like those USD denominated bonds because they think that protects them from currency risk
  7. Nym


    Protecting against currency risks? Is there any "man in the middle" that is doing that? :confused:
    Guess if you are buying EU bonds you must be long to EUR by definition unless they are specifically denominated in a different currency... however I am not aware of any Italian bond denominated in USD.
  8. yes, now many soverigns can be denominated in USD, I wouldn't know how to do it, but there are some hedge funds that do. That is their claim "No Currency Risk."

    As far as I see it, if you are in a hotel in Zurich and have a few francs on the dresser, they are constantly changing value while you are sleeping (or whatever else you do when you are in a hotel room in Zurich.)

    Same goes for every dollar in your pocket until you transfer the risk to the cashier at walmart.

    And if you used it to buy your girlfriend a gold bracelet, who knows how much that will be worth hour to hour?

    But getting back to opies question, it is getting really hard just to stay flat in cash regardless of how you are denominated.
  9. Nym


  10. well, yes and no, if you're keeping score in USD, all I have to show you is more USD. I don't have to explain that your more USD is now worth less that it was when I started.

    When it comes to the economy today Einsteins theory of relativity makes a whole lot more sense than the stuff you read in the old economics books.

    Bens evil plan is working, he's going to get us all risk on, just to stay even.
    #10     Jul 6, 2012