carry trade fee

[RyanPopa]

Hy,

1) what rollover fee does your broker offer?
For ex Ava fx offers me 0.15 eur (in 10000 eur/usd long position), which I consider to be extremly low.

2) Do you know how are this calculated, or are they fix?
3) Does the broker take any per cent of the fee for himself, or it all(all that 0.15 eur) goes to the counterpart or viceversa?
I assume anyone who has ever done a carry trade must know this.

Thanks,
Ryan

 

[Martinghoul]

Depends on the broker... I have made a few posts previously on this subject.

 

[meanreversion]

The cost or benefit of rolling a position from one day to the next, or "tom next" as they call it at institutional level, is a simple calculation based on the relative interest rates of the two currencies involved. For example, if you are "long EUR/USD", what you are in practice doing is borrowing USD in order to sell to purchase EUR, which you then lend out. So day by day, you earn interest on your EUR and pay interest on the USD.

If the interest rates are significantly different, e.g. USD/ZAR, then you will either pay or earn carry depending on which way you are (long USD you pay, short USD you earn).

Right now, because most major currencies all have rates close to zero, the interest rate differential is thus close to zero, so your daily roll will be close to zero, especially for EUR, USD, JPY and GBP.

HOWEVER this is an area where spreadbetting firms nick money from their clients (they will explain this to you if you call them, they don't advertise it on their websites!). IG and City Index both charge 2 pct / year, which equates to a daily charge of 55 bp, or around 0.8-0.9 pip in EUR/USD above and beyond the market tom next rate. There is no reason for this charge other than to make money.

Tradefair are far more competitive on rolls and they mention as much on their website. I don't have an account with them, but they either don't charge an additional roll fee or it's significantly lower than IG/City.