Guys, trading on IB using a margin account. If your funding currency is in EUR or GBP but you are trading US stocks, do you convert EUR into USD or simply leave EUR as it is and borrow the USD? Holding time frame is 6 months to 2years. If i convert it, I am exposed to currency risk when i liquidate the position and convert it back to EUR. On the other hand, if i don't convert, i need to pay interest on the borrowed amount. Any advice here?
Maybe I'm stupid, but don't you have currency risk regardless of your two scenarios? In the first scenario you convert EUR to USD, buy stock with USD, sell stock to get USD, and convert USD to EUR. Depending on the conversion rate at the start and end, you will obviously get a different investing result. In the second scenario you buy stock with USD (that you don't have, so you have to borrow it), sell stock to get USD, repay the USD loan (with interest) at which point you will have either > 0 USD or < 0 USD depending on the investment result, then you'll convert this amount of USD to EUR. So your end result depends on currency conversion rate at the end of the trade. Maybe I'm missing something. I've always had a hard time thinking about this stuff until I write it down with concrete examples. And even then I sometimes get it wrong. Is there a good tutorial for this or a "for dummies" book on the subject?