Hoggums
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This is a method that I don't trade, nor will I trade as the returns will be very poor if there are no large market moves - but this is a genuine method that could be used to make a completely risk free profit if you are expecting a fairly severe move in the currency market. It is only suitable for spread betters..
This is purely theoretical btw - I don't know anyone who has tried this. I'm ignoring buy/sell spread for this simple example.
I took a snapshot today of the Eur/Gbp rate at 8540.6 and the Gbp/Eur rate was 11708.6 as quoted by IG index
So - lets say you have 10K to invest - I'm going to risk most of it.
I'll go long Eur/Gbp at £27.00 per point @ 8540.6 and long of Gbp/Eur at £19.69 per point @ 11708.6 (I'll explain the maths later if you want). This will use up most of the margin in my account.
Lets say Eur/Gbp goes to 9500.0. That means Gbp/Eur will be at 10526.3
This gives me 959.4 pips profit on Eur/Gbp @ £27pp = £25903.80
And -1182.28 pips profit on Gbp/Eur @ £19.69 = £-23279.20
-- giving a total profit of £2624.62
Lets image the Eur/Gbp rate goes the other way to 7800. Gbp/Eur will be at 12820.5
This gives me -740.6 pips profit on Eur/Gbp @ £27pp = £-19,996.20
And 1111.9 pips profit on Gbp/Eur @ £19.69pp = £21893.56
-- giving a total profit of £1897.36
Obviously I am ignoring buy/sell spread - which should be minor. However you could not trade this method using dailies because of the nightly rollover cost which would probably be unequal and detrimental to the account over time. So you would have to trade this using quarterly futures contracts. I have not studied the effects using a decaying futures contract with this strategy.
So there you have it. Not strictly 100% - because if there was no market movement you'd lose money on spread costs - but about as close as you're ever gonna get!
This is purely theoretical btw - I don't know anyone who has tried this. I'm ignoring buy/sell spread for this simple example.
I took a snapshot today of the Eur/Gbp rate at 8540.6 and the Gbp/Eur rate was 11708.6 as quoted by IG index
So - lets say you have 10K to invest - I'm going to risk most of it.
I'll go long Eur/Gbp at £27.00 per point @ 8540.6 and long of Gbp/Eur at £19.69 per point @ 11708.6 (I'll explain the maths later if you want). This will use up most of the margin in my account.
Lets say Eur/Gbp goes to 9500.0. That means Gbp/Eur will be at 10526.3
This gives me 959.4 pips profit on Eur/Gbp @ £27pp = £25903.80
And -1182.28 pips profit on Gbp/Eur @ £19.69 = £-23279.20
-- giving a total profit of £2624.62
Lets image the Eur/Gbp rate goes the other way to 7800. Gbp/Eur will be at 12820.5
This gives me -740.6 pips profit on Eur/Gbp @ £27pp = £-19,996.20
And 1111.9 pips profit on Gbp/Eur @ £19.69pp = £21893.56
-- giving a total profit of £1897.36
Obviously I am ignoring buy/sell spread - which should be minor. However you could not trade this method using dailies because of the nightly rollover cost which would probably be unequal and detrimental to the account over time. So you would have to trade this using quarterly futures contracts. I have not studied the effects using a decaying futures contract with this strategy.
So there you have it. Not strictly 100% - because if there was no market movement you'd lose money on spread costs - but about as close as you're ever gonna get!
