Forex Rollover + ETF Currency CFD position question

[r2997790]

Hi everyone,

This is a bit a left field, but hey ho, I've had an idea, but I am not sure of its validity or its potential yet so I thought I'd ask the brainstrust as you'll pretty quickly tell me I'm sure and thank you!

If you hold 1 standard lot of GBPUSD depending on the broker you'll probably be paid 0.7-0.9 pips in rollover interest for LONG positions each night.

1 standard lot = $10/pip for that $7-$8 per night.
Short positions have a negative rollover.

NOW... I have read that short positions on CFDs are paid rollover, so could you short FXB and effectively have a hedge and be paid on interest on both sides of the trade?

I understand that there's margin requirements to hold two independent instruments so I am not sure of the practicality of this proposition but I did want to understand if anyone had any experience with this and if it is a valid idea?

Thanks!
R

[mjws00]

I don't really play swap trades, but if you are actually hedged, I will bet you that the swap cancels, and that you end up paying interest on the positions. There is no cfd interest arbitrage available, imho. Any gains made via swap will require the risk of holding a postion in the correct direction. You may be able to partially hedge, and get a gain... but there is NO FREE LUNCH.

By design if such a position were possible it would be exploited immediately, in volume, and closed. You may find tiny imbalances once in a while, but slip, commission, spread, and interest on your postions will likely negate any real gains.

I'm happy to be wrong, but a healthy scepticism tells me that you will be up against very large, very smart computers that will close the holes you find.

Good Luck,

Mike

[r2997790]

Hi Mike,

Yes I agree there is almost inevitably something wrong with my basic premise or the margin requirements vs ROI dont make it a wise position to hold vs. other instruments.

re Hedging though, the idea would be that you'd hold the position so any slippages / entry cost would be mitigated over time.

Thanks for your feedback.