Non base currency futures with IB's Universal Account

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Roundtable Fellow
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Non base currency futures with IB's Universal Account

Post by cordura21 » Thu Mar 15, 2012 9:37 am

Hi guys. I want to get detailed information about how margin works when you use IB's Universal Account for trading non base currency futures. I thought some of you know about it and can share pointers to/or information about it, cause I wasn't able to find much on my own.

I was not able to find detailed information at IB's site, and I've been talking with people at IB for a couple of days but I still couldn't find a good answer.

Thanks very much for your help, Cord

PS: Some of my doubts are:
  • 1 Is the loan collateralized by your base currency cash (I guess so)
    2 Is there an interest rate paid on the base currency loans that offsets the interest paid for the loan?
    3 How do you determine the interest rate charged?
    4 Does a 'foreign currency' margin account exist and is it seggregated on my name?
    5 Is the currency just on the margin, not the full position (I guess so)?
    6 P&L adds up to the foreign currency account, and thus is part of the fx risk, or is there any kind of transfer of the values besides the margin requirements?

Roundtable Knight
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Post by 7432 » Thu Mar 15, 2012 8:00 pm

1 seems to be answered
2 well yes, but...
3 IB posts current loan/borrow rates someplace on their website and they are W I D E
4 you carry foreign currency in your account as a cash position used for margin
5 yes
6 I'm not sure about this question/statement, the last part, I don't believe there is any transfer of cash position besides margin, adjusted daily.

if you have winners and a positive balance in euros(lets say) the euros just sit there in cash and collect interest same as your base currency. if you have losers and carry a negative euro balance the negative balance just sits there and you pay interest.

if you have a regular universal account IB will convert funds for your margin, but they won't zero out balances.
if you have an ira account you have to use fx trader to convert for margin, otherwise the trade or order will be rejected.

if you can forget about the currency moves, I have found its easier to just carry various amounts in different currencies.

Moto moto
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Post by Moto moto » Fri Mar 16, 2012 3:42 am

I think a lot will depend on which IB account you may have as they have a few variations.

Ask them for a paper trading account and do a few trails over a week or two and see exactly where the money moves for peace of mind with one big trade between your local currency and a different one for both longs and shorts - vary it between their virtual and portfolio FX as well.

Depending on instruments traded, stocks, fx, futures, options and the way they are held, and the leverage used it can make a difference.
(I have heard various answers from different people about this which became confusing, and so I did some of my own testing - found it made little difference to me so I have ignored it since - plus who really understands accounting :))

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