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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.
Can you help answer these questions from other members on NexusFi?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
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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.
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.
