do you understand rollover properly?

Hello,
check the following print-screen from my trading platform:


There are all the orders I placed(the one in the bottom), the rest are rollover (red=sold, blue=bought , the one in white was canceled

Rollover is calculated using short term interest rates differential. As I see, by holding EUR, I pay rollover fees, so I assume the short term interest rate for EUR is smaller than that for USD.
1) where do you find the short term interest rates quotations?
2) can you explain for instance how was determined the sell value of 1.4962000, and bough value of 1.4962120 for the rollover of 24 NOV?

I assume understanding this is very important for anyone who wishes to hold on a position for 1,2 mounths period.

Thanks

1) There are numerous sources for MARKET short term rates, but what is more important is what rates YOU are being charged. Your broker will be the one to answer that for you.

2) Probably their official P+L closing rate if I had to guess. Once a day your broker almost certainly takes a snapshot of rates in order to value your positions (if you get a daily P+L statement, that's how it's calculated). So I would guess that's the start rate for the swap. Doesn't really matter so much what the start rate is, it's more important what the differential is, and that, in turn is determined by the interest rate differentials.

What you will probably find is that the bid/offer spread for the interest rates is far wider than in the interbank market, so any positive carry you might earn will be eroded, and any negative carry you might pay away will be exacerbated. Sorry - just the way it goes. Can always hunt around for another broker if you get the rates and they're not very good.

If you're REALLY desperate to do the calculation manually your self google something like FX Swap Pricing I reckon, or maybe forward FX pricing. Might learn something into the bargain

Good luck


GJ

RyanPopa said:

can you explain for instance how was determined the sell value of 1.4962000, and bough value of 1.4962120 for the rollover of 24 NOV

Click to expand...

0.12 of a pip for 1 day => expand to 365 days and this represents about 2.9% p.a. on the underlying position value. A bit on the high side. Some of the other days are only 0.06, 0.18 on 19-Nov probably due to weekend and tom-next processing.

Remember the "broker" makes a mark up on the interest rates differentials. Rates on both EUR and USD are close to zero at the moment so the "broker" will both charge people who are long and charge people who are short because of the mark up (nice risk free earner for them).

You need to find out how your specific broker does the roll... That's the only answer to your question.

In general, the procedure for the roll involves selling spot and buying t/n (tom-next), if you're long, and vice versa, if you're short. Your broker may charge you something in transaction fees vs possibly waiving the bid/offer on one of the legs. The mkt price for t/n is determined according to the interest rate differential.

Again, get the broker to send you an official set of rules they use to do the roll... Overall, GJ's description of the procedure applies.

Mumbo Jumbo!