Hedge against currency risk

This is a discussion on Hedge against currency risk within the Forex forums, part of the Markets category; Hello, I have stock positions in USD, but my local currency is CZK. I would like to hedge against currency ...

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Old Sep 7, 2017, 9:19pm   #1
knm
 
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Joined Jun 2013
Hedge against currency risk

Hello,

I have stock positions in USD, but my local currency is CZK. I would like to hedge against currency risk. I have Interactive brokers account.

I have Shorted 10.000 USD/CZK to protect my stock positions against currency changes. The leverage on CZK is 1:20, on USD 1:40.

In my console I see position -10.000USD/CZK. When shorting you pay interest from the borrowed money. I would like to know if Iīm paying interest from the 10.000USD or only the margin (10.000/20 or 10.000/40 donīt know which leverage apply)? I hope correct answer is: Only from the margin?

If so I would like to know how big the margin on forex position is. However in my console I see only total maintenance and initial margin (I have also other positions). Does IB provide some detail of what is total margin made of?

Great trading for everyone.
Martin
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Old Sep 7, 2017, 9:40pm   #2
Joined Apr 2016
The interest is charged on the margin. If the price moves against you, the margin requirement increases and so does the interest charge.

The margin requirement is fixed for each instrument. Interest is charged against that. Changing your leverage has no effect on the charge.
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Old Sep 8, 2017, 12:08pm   #3
Joined Feb 2016
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Originally Posted by EnlightenedJoe View Post
Changing your leverage has no effect on the charge.
Leverage is the most powerful thing which i guess can change the traders possibility to earn more by investing less however i think high leverage can also claim higher damages as well so the new traders being unaware of the market conditions should keep the leverage low in start in order to avoid blowing up the account.
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Old Sep 8, 2017, 12:12pm   #4
Joined Apr 2016
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Originally Posted by progix View Post
Leverage is the most powerful thing which i guess can change the traders possibility to earn more by investing less however i think high leverage can also claim higher damages as well so the new traders being unaware of the market conditions should keep the leverage low in start in order to avoid blowing up the account.
My youngest niece, I call her little mouse, doesn't like strawberry flavoured ice cream. I don't know why.
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Old Oct 27, 2017, 11:54am   #5
Joined Apr 2017
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Originally Posted by progix View Post
Leverage is the most powerful thing which i guess can change the traders possibility to earn more by investing less however i think high leverage can also claim higher damages as well so the new traders being unaware of the market conditions should keep the leverage low in start in order to avoid blowing up the account.
But high leverage always contains high risk , and it could be dangerous if there is no accurate risk managing plan.
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Old Oct 27, 2017, 6:04pm   #6
Joined Sep 2013
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Originally Posted by knm View Post
Hello,

I have stock positions in USD, but my local currency is CZK. I would like to hedge against currency risk. I have Interactive brokers account.

I have Shorted 10.000 USD/CZK to protect my stock positions against currency changes. The leverage on CZK is 1:20, on USD 1:40.

In my console I see position -10.000USD/CZK. When shorting you pay interest from the borrowed money. I would like to know if Iīm paying interest from the 10.000USD or only the margin (10.000/20 or 10.000/40 donīt know which leverage apply)? I hope correct answer is: Only from the margin?

If so I would like to know how big the margin on forex position is. However in my console I see only total maintenance and initial margin (I have also other positions). Does IB provide some detail of what is total margin made of?

Great trading for everyone.
Martin

You pay for the amount you borrowed. Otherwise this would be interest rate*1/365+Libor rate * your deposit. Would be extremely small amount.
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