I am looking for a good simple way to edge currency risk 1) I have a base EUR currency account and I mainly trade USD stocks. At the moment I have all my funds in EUR and use the Margin Loan in USD, but of course I pay interest In my Account Window > Market value I have: - a positive EUR Total Cash - a negative USD Total Cash - a small negative Total(Eur) (Because of margin) First question: As I understand correctly, even if I use the Margin Loan to buy stocks in USD I also have currency Risk: My loan is denominated in EUR so if the USD goes down it does not only impact my PNL but also my assets at the moment that I have to close the loan, is it correct? 2) My trades are open for weeks so I think for me the best option is to convert EUR in USD with FXCONV ( and not IDEALPRO virtual), but keeping my base currency in EUR for accounting and so. If I do this I will have Account Window > Market value - 0 EUR - Positive USD Total Cash - a negative Total USD (if I use margin) 3) I can hedge my positions with a FUTURE, I though to use the M6E micro Emini EUR/USD Future and go LONG with the same amount as my current USD position. How will the Future position impact my account, margin and buying power? Is this scenario correct? Am I missing something?
Does your broker offer forex? Buy EURUSD? Might be easier & less costly than rolling expiring futures contracts plus paying commissions & spreads to roll. No expiration with forex. Will pay swap fees but that's priced into futures contracts with decay so no difference. If just a stock account, you could also buy FXE (euro currency ETF). No rolling to deal with. FXE has a .4% expense ratio which is pretty small so insignificant. ***Never hedged currency so not knowledgeable with regards to most of your questions.
The simplest solution would be to buy USD using EUR, such that your USD cash value goes to zero. When you continue to have a negative USD cash value will you also incur USD debit interest, which complicates the calculation of your USD exposure.
Open a US-based stock trading account in USD, then hedge your position in the Forex market (long or short EUR/USD, depending on the direction of your bet). Any stock market profit you make in USD will be converted to EUR (by your broker or your own bank) and the Forex hedge will protect you from currency fluctuation.
my Broker is Interactive Broker. Indeed I also consider ETF and Options I did not do a real calculation of what is cheaper but reading around seems that the Future is a simpler/cheaper choice. I will do a check
Yes that’s indeed what I want to avoid, the issue with converting all to usd is that if I don’t hedge the EUR value of my account and PNL can be eroded if EUR appreciate against USD
If you want to invest 490 euro in a very good solution then follow this online course. http://www.treasuryservices.be/treasury-academy The author was for many years responsible for the risk management of the whole Philips group worldwide (+1,200 companies). He hedged on a daily basis the currency risk for the entire group. I have the complete course but cannot give it because of copyright. For me it was well worth the investment. Still read it again every now and then. PS: The author has Dutch nationality. Just another page that can give you an idea about the things you cn mearn there: https://www.treasuryservices.be/ToolBox/home I have never seen such a professional learning course on this subject. I have no link whatsoever with treasuryservices. Just contacted them many years ago when I was treasury manager in a billion euro company.
that’s more or less what I thought to do but hedging the whole account and not single positions that would be easier.
Please post back what you find out. I am also with Interactive Brokers and I’m trying to hedge some currency risk. I’m more familiar with trading equities and options, so using a currency ETF like FXE would be the easiest for me, but I think the ETF management fee is 0.40%. I haven’t done futures trading so I don’t know the impact of commissions and slippage costs.