How can I get $4m cheaply?

[jls483]

Colin,

What you suggest is a different kettle of fish entirely.

I was looking to arbitrage the small difference in the returns of forex spreadbets and real forex transactions. Although the differences are real, they are very small and easily outweighed by the cost of financing the positions on margin (and if you don't do it on margin then the returns are tiny - 2%).

What you are suggesting is the old "short the rolling cash and go long on the quarterly". I'm fairly sure that there isn't any hidden value between these instruments and one would just lose out to the spread in the long run. It is also a little harder to do the maths to work out if it would work or not.

John.

 

[jls483]

Trader333.

You are exactly right it is arbitraging and one of the reasons for looking to an alternative to deal4free for the real forex transaction is to have kept it a secret. Obviously I wouldn't have gone public if it was a goer.

John.

 

[ColinRiche]

I havent done the math but i believe there is a flaw in that plan somewhere - doesnt the quarterly bet suffer from decay ?

Perhaps someone out-there can enlighten us as to why this doesnt work.

 

[jls483]

Colin,

Which plan do you think there is a flaw in? My plan for arbitraging the rolling cash against the real forex transaction or your plan to sell the quarterly and buy the rolling cash and hope that the income from financing of the rolling cash outweighs the decay in the quarterly price and spread losses.

John.

 

[ColinRiche]

my one John,

and its buy quarterly sell rolling

is there a decay - i dont know - i dont trade contracts

sometimes i wish i did when a trade goes against me and i'm in it for some time long paying the interest eash day

 

[jls483]

Sounds like neither of us too confident in your plan - and I've already admitted my plan is non-starter so time to the end the thread.

BTW. With GBPUSD you get paid for being long and have to pay for being short. This is because the uk base rate is higher than the US base rate.

John.

 

[ColinRiche]

interesting - didnt know that - thanks jts