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Spot or Futures to Position Trade?


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Updated by SMCJB
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Spot or Futures to Position Trade?

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  #1 (permalink)
Charlotte north Carolina
 
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Posts: 8 since May 2020
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Hi all - I position/swing trade futures (however you want to define it) so average holding time can be a few days to a few months. To make things simpler, I've always just traded the futures contract for everything.

However, this past week I accidentally let a few /6A contracts go to expiry and now hold a decent chunk of AUD/USD in my account. It got me thinking - why don't I just hold spot so that I don't have to worry about rolling over all the time?

I thought when I did my initial analysis on this that IB (my current broker) didn't have that great of leverage for spot - but the new AUD/USD doesn't seem to have changed my excess liquidity all that much.

Am I missing something here or anyone else have any insights they can share from their experiences? I know the liquidity of each can change dramatically for each, especially if a big news event is coming up, but that's usually not a concern of mine since I hold for so long.

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  #2 (permalink)
tampa florida
 
 
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just trade the second month less rolling less volatility cleaner

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  #3 (permalink)
Charlotte north Carolina
 
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jamrock View Post
just trade the second month less rolling less volatility cleaner

But is there an advantage to using the futures versus spot in that scenario?

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  #4 (permalink)
Legendary Market Wizard
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For a large account size and a Pro not a Lite account, Interactive Brokers lends AUD at 1.058% and lends USD at 1.09% but they pay no interest on deposits on either currency. Hence no matter which you have this trade on, IB is charging you over 1% in carry costs. (For smaller accounts or Lite accounts the cost is even higher)

Looking at 6A settlements on the CME last night (18-Sep-20) 6AZ0 settled 0.7301 and 6AZ1 settled 0.7302 so the annualized cost of carry using futures is basically 0.


Rebelgt13 View Post
But is there an advantage to using the futures versus spot in that scenario?

Yes. In this case it saves you over 1%/year in carry charges. Even if you roll 4 times at a cost of $20 each, that's only a .08% cost.

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September 19, 2020


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