I would really appreciate some help with the folliwng problem.
I have some redundant base rate swaps which are just debiting around £6,000 each month, and it occured to me that I should be able to initiate an interest rate trade each month, to at least off set most of this cost, perhaps using options, swaptions, or options on futures. Although Ive been an active options trader for 14 years, interest rates arent my area. here are the details of the swaps.
Fixed rate base rate swap 5.78% GBP 357,232
Fixed rate base rate swap 5.77% GBP 923,808
So the total swap amount is £1,281,040
These swaps were originally for a 15 year term (early 2004), and now they only have 9 years left.
They were put in place back in 2004 to hedge a base rate loan, but then I paid the loan off and got lumbered with the swaps. Now they are just a liability debiting money from my account each month. Until base rate returns to more normal levels that’s going to continue for some time.
I should be able to trade against these swaps to earn some income and hedge off the risk. I wasn’t sure if I would be able to use the swaps to reduce margin, because they are held at a bank, not on my brokerage account. However, I suppose there’s a chance that I could supply trade confirmations to Interactive Brokers, who might then reduce my margin on the trade and thus make the trade more cost effective. As bank have a treasury management department I guess there is also a chance I could actually place the trades directly with them rather than Interactive brokers, but I know they won’t give me any advice about setting the trade up, and they may resist even taking a trade for me.
I use Interactive Brokers TWS trading platform, so I should be able to subscribe to whatever data feed I need for this trade, assuming I don’t have it already.
I could really use some guidance. Ideally help from someone who is has a good working knowledge of interest rate products, who can setup an initial trade for me, and explain the mechanics, so I can trade it going forward.
Jackal007
I have some redundant base rate swaps which are just debiting around £6,000 each month, and it occured to me that I should be able to initiate an interest rate trade each month, to at least off set most of this cost, perhaps using options, swaptions, or options on futures. Although Ive been an active options trader for 14 years, interest rates arent my area. here are the details of the swaps.
Fixed rate base rate swap 5.78% GBP 357,232
Fixed rate base rate swap 5.77% GBP 923,808
So the total swap amount is £1,281,040
These swaps were originally for a 15 year term (early 2004), and now they only have 9 years left.
They were put in place back in 2004 to hedge a base rate loan, but then I paid the loan off and got lumbered with the swaps. Now they are just a liability debiting money from my account each month. Until base rate returns to more normal levels that’s going to continue for some time.
I should be able to trade against these swaps to earn some income and hedge off the risk. I wasn’t sure if I would be able to use the swaps to reduce margin, because they are held at a bank, not on my brokerage account. However, I suppose there’s a chance that I could supply trade confirmations to Interactive Brokers, who might then reduce my margin on the trade and thus make the trade more cost effective. As bank have a treasury management department I guess there is also a chance I could actually place the trades directly with them rather than Interactive brokers, but I know they won’t give me any advice about setting the trade up, and they may resist even taking a trade for me.
I use Interactive Brokers TWS trading platform, so I should be able to subscribe to whatever data feed I need for this trade, assuming I don’t have it already.
I could really use some guidance. Ideally help from someone who is has a good working knowledge of interest rate products, who can setup an initial trade for me, and explain the mechanics, so I can trade it going forward.
Jackal007