I Need Help Setting Up a FX Hedge

EDHECUTIVE · May 27, 2011

I want to eliminate my FX risk.

I'm a starting an MBA program in Europe this September. I will be receiving two USD payments to cover tuition and living expenses: one in September and another in January. I will have to convert these payments to Euros.

At the current EUR/USD 1.414 I'm estimating a budget surplus. If EUR/USD rises to 1.5102 -- I'm forecasting a slight deficit.

As a mere retail client, I can't enter into a forwards. So how can I best hedge this risk (i.e. lock my rate at 1.4 something)?

I was thinking entering into offsetting futures contracts (long Euro, short Dollar) and rolling them over if necessary.

I'm concerned about fees, margin calls, etc. Ideally I want to eliminate this risk via a hedging strategy for a reasonable fee so I can get on with my studies w/out worrying about taking a haircut of FX swings.

Any advice from people who know FX brokers, fees, and strategies would be grateful.

Thanks!

forexproptrader · May 29, 2011

EDHECUTIVE said:
I want to eliminate my FX risk.

I'm a starting an MBA program in Europe this September. I will be receiving two USD payments to cover tuition and living expenses: one in September and another in January. I will have to convert these payments to Euros.

At the current EUR/USD 1.414 I'm estimating a budget surplus. If EUR/USD rises to 1.5102 -- I'm forecasting a slight deficit.

As a mere retail client, I can't enter into a forwards. So how can I best hedge this risk (i.e. lock my rate at 1.4 something)?

I was thinking entering into offsetting futures contracts (long Euro, short Dollar) and rolling them over if necessary.

I'm concerned about fees, margin calls, etc. Ideally I want to eliminate this risk via a hedging strategy for a reasonable fee so I can get on with my studies w/out worrying about taking a haircut of FX swings.

Any advice from people who know FX brokers, fees, and strategies would be grateful.

Thanks!

hey, you are smart to understand and try to protect yourself against this currency risk. The good news is that you can indeed purchase forwards and fx options as a retail trader. let me know if you are interested in this and good luckk.

Sidekicker · Nov 21, 2012

EDHECUTIVE said:
I want to eliminate my FX risk.

I'm a starting an MBA program in Europe this September. I will be receiving two USD payments to cover tuition and living expenses: one in September and another in January. I will have to convert these payments to Euros.

At the current EUR/USD 1.414 I'm estimating a budget surplus. If EUR/USD rises to 1.5102 -- I'm forecasting a slight deficit.

As a mere retail client, I can't enter into a forwards. So how can I best hedge this risk (i.e. lock my rate at 1.4 something)?

I was thinking entering into offsetting futures contracts (long Euro, short Dollar) and rolling them over if necessary.

I'm concerned about fees, margin calls, etc. Ideally I want to eliminate this risk via a hedging strategy for a reasonable fee so I can get on with my studies w/out worrying about taking a haircut of FX swings.

Any advice from people who know FX brokers, fees, and strategies would be grateful.

Thanks!

Don't forget to factor in the cost of holding open the hedge.
What you list above is a 7% change in currency but you have to add around 1-3% for fx margin costs.
Best way is to figure out the average monthly range and open a hedge above/below a certain point.
Also, where are you gettin that figure for 1.414 from? Eur/usd is nowhere nea that

I Need Help Setting Up a FX Hedge

EDHECUTIVE

Newbie

forexproptrader

Newbie

Sidekicker

Well-known member

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