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Profiting by Swap
FX Swaps are a regular tool used by banks and financial institutions in the course of business. Such transactions however could also be used to maximize the utility of money capitalizing on the interest rate differentials affecting the different currencies.
A typical Swap involves two parts, a spot transaction to acquire the currency desired and a reversed forward transaction to revert back to the original currency. The complexity as such mainly limits the use of swaps to banks and other financial institutions that regularly take advantage of the differences in interest rate differentials.
FX Station SWAP
The Swap facility of FX Station is a natural feature of deferred Spot FX trading, in buying one currency against another a trader either gains or is penalized by the prevailing interest rates between the two currencies. Thus if you bought a currency with higher interest rates than that you sold the net effect would be for you to gain on the differentials and vice versa. Given the level of leverage available a trader could also get interest gains as a multiple of his capital.
For example:
When you buy 10 contracts of GBPJPY and hold it for 15 days…
At the prevailing SWAP Points of USD 10 per contract you effectively get:
10 x 10 x 15 = $ 1,500 dollars in interest differential gains.
By using a margin of 10,000 USD you benefit from the interest gains accruing to $ 1,000,000.
A 7.5% return to the Maintenance Margin for 15 days or 3.8% gain on $ 1,000,000 in annualized terms.
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| SWAP RATES
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These rates are effective starting 10 May 2005, 0300Hrs (Philippine Time). The roll-over/swap charges for trade positions left opened overnight will be as such.
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Prm Buy |
Prm Sell |
| EURUSD |
-$6.00 |
$3.00 |
| GBPUSD |
$4.50 |
-$9.00 |
| AUDUSD |
$2.80 |
-$6.80 |
| USDJPY |
$8.30 |
-$14.00 |
| USDCHF |
$6.50 |
-$10.30 |
| GBPJPY |
$20.00 |
-$25.00 |
| EURJPY |
$6.50 |
-$9.50 |
| EURGBP |
-$8.00 |
$6.00 |
| EURCHF |
$2.50 |
-$6.50 |
| USDCAD |
$2.00 |
-$4.00 |
| NZDUSD |
$5.00 |
-$8.10 |
| AUDJPY |
$9.50 |
-$14.50 |
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