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Interactive brokers currency balance
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Interactive brokers currency balance

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Administrator: Retired Backtester
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Interactive brokers currency balance

Okay, I'm asking the question to also clarify it in my own brain.
After a call to IB support things are less clear than before.

So we have a guy which has an IB account in EUROS.

This wants to buy USD stocks, and want to avoid currency loss, example:
Day 1: EUR/USD=1.13, stock value: $10, buy 1000 shares, value in EUROS: $10000/1.13 = 8849.55 €
Day 180: EUR/USD=1.30, stock value: $10, sell 1000 shares, value in EUROS: $10000/1.30 = 7692.31 €
Loss because of EUR/USD: -1157.24€

By default IB create a loan in the "other" currency, USD here, fine, but it this covering the currency risk?
I presume not, but would like to clarify with people here who are dealing with the same kind of currency hedging.

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  #3 (permalink)
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Salut Sam,

https://individuals.interactivebrokers.com/images/flash/tours/MechanicsOfForeignTransaction/index.html

Al

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I also have my IB account configured for EUR as base currency since I live in Europe and my cash transfers from and to the trading account is done exclusively in EUR...

But I also hold various amounts of the top 7 currencies, including USD of course since all my trading on CME futures are in USD. Short answer, you have to manage your own hedging on currencies, IB for sure will not be doing that for you

If the balance of any currency you hold is negative, you are charged a daily interest rate, the percentage depends on the currency which is on loan (https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2)

basically, you can take a 6E future or option in the opposite direction, or simply initiate a forex trade on the EUR/USD or whatever pair you want to hedge for your FX fluctuations.

You have to manage your IB account like a pro no way around that.

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F

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Thanks @redratsal, the video was helpful.

But from what I understand the collat. loan basically remove the currency risk, for a cost of 1.61%/year for USD (which seems fine to me). So if you don't want to manage your account like a pro and like @Fadi , and assuming you have an account in Euros and no other loan in USD, just buy the USD instrument you want and that's it!

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sam028 View Post
Thanks @redratsal, the video was helpful.

But from what I understand the collat. loan basically remove the currency risk, for a cost of 1.61%/year for USD (which seems fine to me). So if you don't want to manage your account like a pro and like @Fadi , and assuming you have an account in Euros and no other loan in USD, just buy the USD instrument you want and that's it!

Depending on the amount of your account and your trading style, 1.61% year might be costy, avoid beeing on a loan best thing imo is to right click on the mouse when you place the order and attach FX, IB will buy foreign currency for the exact amount of your order without creating a loan. As far as currency protection you'll have to manage it like you and Fadi said.

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Attention NEW: negative rates on some currencies

Starting 1st of february IB is announcing new handling of rates depending on the currency
and the policy in the National Bank of this country.
Having my account partly in Swiss francs I got this message from IB today:

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Be aware..
GFIs1

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sam028 View Post
Thanks @redratsal, the video was helpful.

But from what I understand the collat. loan basically remove the currency risk, for a cost of 1.61%/year for USD (which seems fine to me). So if you don't want to manage your account like a pro and like @Fadi , and assuming you have an account in Euros and no other loan in USD, just buy the USD instrument you want and that's it!

Yes, that is how it works, but you are only covered for the initial purchase price. Should the value of your security increase / decrease, then your hedge will no longer be as effective. You can however do spot trades on the USD to rebalance your loan periodically.

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