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Hedge GBP INR

air04
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Hedge GBP INR

#308286

Postby air04 » May 13th, 2020, 2:43 pm

I am sorry I am posting in this forum, I could not find any other section that seemed more relevant. Please guide me to the right place if I got it wrong.

I am expecting some INR in many months time, and want to hedge it. I have accounts with IB, IG, CMC market, the latter two are spreadbetting(SB) for now.

I would prefer using SB as it allows smaller amounts. The most cost effective one is with CMC markets which has futures for INR/USD and GBPUSD. As it is spreadbetting and it is GBP(not USD) per point, it gets a lot more complicated. So, if I want to hedge £10,000 worth of INR today, I can sell xxx points(worth 10KGBP) INR/USD and buy xxx points(worth 10KGBP) GBP/USD. But that hedge has to be corrected continuously.

IG has GBP/INR spot, but their charges work out to 15%+ per year!!! The interest rate differential is close to 6%.

IB allows SIR/MIR(INR/USD futures) and GBP/USD futures; but as they are per contract(mini GBP/USD M6B contract £6250 , and mini INR/USD is around £12000), and the contract size is quite large to round off.

Indian market has GBR/INR futures, but that will be difficult for me in UK to do it as a non-resident.

Has anyone come across such issues, and have a way to hedge it? Any suggestions will be appreciated.

Thanks in advance,

GoSeigen
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Re: Hedge GBP INR

#308403

Postby GoSeigen » May 13th, 2020, 7:57 pm

air04 wrote:I would prefer using SB as it allows smaller amounts. The most cost effective one is with CMC markets which has futures for INR/USD and GBPUSD. As it is spreadbetting and it is GBP(not USD) per point, it gets a lot more complicated. So, if I want to hedge £10,000 worth of INR today, I can sell xxx points(worth 10KGBP) INR/USD and buy xxx points(worth 10KGBP) GBP/USD. But that hedge has to be corrected continuously.


This is the way to go isn't it? If the amounts are not life changing then the hedge doesn't have to be precise surely? Hedging 90%+/-10% should be good enough... then you don't need to sweat the adjustments too much. OTOH, certainly on IG, small adjustments can be made by part-closing spread-bet positions and, because the commission is always a %age of trade size, it is pretty much costless to do.

Whatever you choose, make sure the frictional costs are low enough for it to be worth the bother. IME minor pairs are pretty expensive to trade. GBPUSD should be fine.

Let us know how you handle it.

GS

air04
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Re: Hedge GBP INR

#308903

Postby air04 » May 15th, 2020, 3:16 pm

Thanks GS. I plan to use CMC markets and do the GBP value for INR/USD and GBP/USD.

What you say makes sense, it is not worth the effort getting the hedge perfect.


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