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Question about Hedging Forex - Help Needed
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Created: by excite2 Attachments:0

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Question about Hedging Forex - Help Needed

  #21 (permalink)
Trading Apprentice
new york
Futures Experience: Advanced
Platform: ninjatrader
Posts: 13 since Jun 2010
Thanks: 0 given, 0 received

Thanks everyone for all of your help and for taking the time to thoroughly respond. Because I never hedge, I just needed practical advice on the QUALITY and EFFICIENCY of each hedging method. Even though I never hedge, I am well aware of all of the pros and cons of hedging strategies/methods that people have used to try and eek out a profit that never work, or are marginally successful (triangular arbitrage, carry trades, etc). I am not hedging for any of those reasons... These last few responses have explained exactly what I needed to know. Thanks for all of your help.

And to answer Macroninja's question I am trying to find the most efficient way to remain 100% delta neutral in my forex position without the problems associated with having to constantly re-balance the deltas of futures options to remain delta neutral. I simply want to place a hedge and have it protect my position 100% on a 1 to 1 ratio, less any associated fees. I understand all the fees, swaps, spreads, etc, that are associated but those costs are insignificant for what I'm doing. Thanks again!

Last edited by excite2; December 31st, 2015 at 11:53 PM.
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  #22 (permalink)
Trading Apprentice
Long Island, NY
Futures Experience: Advanced
Platform: TOS, OX
Broker/Data: TOS, OX
Favorite Futures: ES, TF,, ZB, ZN, 6A, 6B, 6C, 6E, 6J, 6N, CL, NG, GC, SI, HG, ZS, ZW, ZC, CC, SB, KC, CT
Posts: 19 since Jul 2014
Thanks: 0 given, 10 received

excite2 View Post
I am a trader from the U.S. and since no forex hedging is allowed in the U.S. I would like to know if there is a way to create a hedge for any spot forex currency pairs that is hedged 100%? I only know of 3 possible ways, but I have not tried them so I was wondering how effective they are?

1. I could hedge with futures, 2. with options on futures, or 3. with 2 other currency pairs to create a synthetic pair. But what I need to know is if these approaches hedge my position on a 1 to 1 ratio, where the hedge is perfect? I'm not sure if the futures move 100% in tandem with the spot pair, and with options I have to worry about the delta changing as price moves, and with the synthetic pairs, I'm not sure how strongly it hedges. Any help would be GREATLY appreciated! Thanks.

The "no forex hedging in the US" is a joke. What is considered hedging under this rule is not hedging. It's simply an accounting question using FIFO. You can have accounts at different brokers to get around this, if it's an issue for you.

But hedging would would really be more like a ratio write of options, or spreads, or other strategies that partially offset risk. There is no problem to do these.

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