MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Very off-topic foreign currency futures question

LLJB
in Off-Topic
Sorry for a way out there question, but I'm hoping someone here might have a little experience with foreign currency cross-trades on the futures market. Late last year I traded a spread long Canadian dollars and short the Euro. The symbol on Globex is ECD. Gains and losses are in CDN. When I closed the trade I had a profit, great. But what I think I have now discovered is that the profit was left in my account in Canadian dollars, meaning its worth roughly 10% less today than it was when I closed the position. I would have expected, since I have a US dollar account, that when I close a position everything gets translated back to dollars and I'm done.

Does anyone know if this is standard practice at all brokers or should am I reasonably surprised/upset that I've ended up losing money I didn't even know I had at risk?

Comments

  • scott
    edited February 2015
    Not sure on Forex, but I know in terms of trading stocks in other global markets, if I were to sell something, it would be in whatever currency it the stock was priced in. In other words: if I were to buy something in London in GBP, I'd have to trade USD$ for GBP$, then if I sold, it would be GBP$ until I traded that amount back for USD$ - if that's what I wanted to do.)
  • LLJB
    Thanks @scott, that makes sense to me. I had a global trading account and I had to do the same thing. I had to convert my USD into whatever currency, then I could trade on a foreign market and if I wanted to take my money out of the account I had to convert it back to USD at the prevailing exchange rate.

    In this case I never converted anything away from USD. Even though the margin requirements are in CDN, no money is ever converted. Its just a daily calculation to make sure the USD in the account are sufficient to "cover" the CDN margin requirements. Every day on my statement everything is converted back to USD and it also seems logical to me that while a position is open, my gains and losses are "at risk" in terms of currency fluctuations. But my assumption, and apparently an incorrect one, was that once the position was closed, they wouldn't leave a foreign currency gain in a USD account in that foreign currency. I wonder what they would do if it was a loss?

    I suppose if the CDN had appreciated I wouldn't be upset, but I'd still be surprised :)

Sign In or Register to comment.