I've got a house in Spain that I bought in early 2014 when the exchange rate was 1.22. I’d like to hedge my exposure to EUR back to GBP, especially now that the EUR is stronger than when I bought it. I could mortgage it and convert back to GBP but it’s expensive to mortgage in Spain (c.4% of advance) and I will pay c. 2.5-3% interest, albeit I can invest the cash elsewhere. I’ve also been looking at leveraged ETCs in my SIPP but I believe the volatility of the currencies has the scope to mess up the exercise with the compounding issue. Alternatively, I am considering using a CFD or taking a long term spread betting position. Has anyone got any views on the validity of this approach, and which company would be best to do it with as the exposure I would be taking is significant? Thanks
I was thinking the same thing - SB positions are widely seen as uneconomical for long-term positions. Probably even more so for the minor protection in this case.
But the fact that you're thinking about an SB account and taking a position makes me think also - why not trade forex and potentially make profits on short-term moves that will become your cash reserve against a poor currency exchange rate? In this case, there's obviously no need to be focused just on EUR/GBP.
I suppose many, maybe most, new forex traders who open a UK SB account quite soon lose their money and close it again. However, you're not in their boat as you have come here to T2W before throwing your life savings at trading. Is this something that might appeal to your nature/character?
options-george
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A friend of mine has been asking me similar questions. Though she in the position where she has some Sterling cash, that she is looking to protect from further currency fluctuations. She is thinking about leaving the UK for good to head back to Spain at some point in the future, hence she cares a lot about how the Euro trades against the Pound.
Not the same position as yours, but similar.
Agree re downside of daily financing costs if using CFD's. Using longer-term options would be another alternative, though is not that easy to understand particularly for somebody who doesn't normally trade. In this case I am not referring to the "rip-off" options offered by your typical spreadbetting company!
I will continue thinking about this, and will let you know if I come up with something!
Not the same position as yours, but similar.
Agree re downside of daily financing costs if using CFD's. Using longer-term options would be another alternative, though is not that easy to understand particularly for somebody who doesn't normally trade. In this case I am not referring to the "rip-off" options offered by your typical spreadbetting company!
I will continue thinking about this, and will let you know if I come up with something!
