[Bwxb]

It can be touch for retail becuase the rates at the buckets aren't usually the best. Much better at a prime broker.

Another thing - the buckets this "hedging" nonsense because they can double roll you.

Typically at a PB and on all of the top institutional platforms there is no such thing. If you want to initate a similar style say for example to scalp around a core postion you would use a mutiple allocate breakdown.

[snackly]

Originally Posted by Bwxb »

The carry trade can be tough at the retail level becuase of the rates the buckets pay are usually a rip off.

Go with the a non-mm and your off to a good start.

Another thing on "hedging" - There is no such thing in FX. In the real interbank market there was no such thing. You buy then sell to exit. Yes you can have a long and a short but it was / is done by a multiple alloc. breakdown.

This "hedging" term was created by the buckets drum roll - It allows them to double roll you.

I don't think that's correct is it? You can hedge a long FX spot position by buying the put at the money, and the reverse for a short FX spot position.

If you do this on an ECN like IB, which lets you trade FX options, futures (CME) and spot FX (IDEALPRO), you can fully hedge your trades.

You could theoretically do this with bucket shops, but say you short the EUR.USD and then buy the call on IB at the money. The problem as I see it is that the bucket shop could theoretically (although unlikely) take the EUR.USD up when its going down. Not quite likely in a real large movement but just the possibility means its out of the question for any trader with serious risk management.

And in any case the hedge on IB against a spot position at an FCM bucket shop would fail if you weren't highly capitalized because you'd get a margin call, they don't care that you have the option at another broker.

If you trade them through the same broker, you'd never get the margin call since you'd be in the money with the put as your short trade is losing, and you would of course have a stop loss order anyway, so that your losing trade if it goes far enough has the opportunity to be a winning in the money option exercise.

Worst case you're out the premium.