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  • hia_intell hia_intell Dec 10, 2012 9:10 PM Flag

    High Dividend Strategy

    Want another high-dividend strategy ?

    Consider a "carry trade":

    Set up a Forex account for 100 to 1 leverage. Then take positions at 50 to 1 leverage. So for $2000 take a $100,000 position in the Australian dollar. Then look for 2.75% yearly interest on the $100,000 amount. But see, the principal (actually the margin amount) is only $2000 while the expected yearly interest is $2750.

    The catch ? Well, a 1% change in the price of the currency would be a 50% change in the margin amount. Also, if the margin falls under $1000 then the position is automatically closed out.

    Want higher interest ? Look at the Rand and the Ruble.

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    • Interesting in theory, BUT betting on currencies with leverage is one of the riskiest types of "investing" in the history of money. Your money can disappear in a hurry. 1% change in currency is miniscule.

      • 1 Reply to soldi_reali
      • A currency carry-trade is a leveraged long-term position for the purpose of getting the interest on a high yielding currency. Just let the value of the position fluctuate and get the interest. The margin on the position can disappear in a hurry but the margin is just a small deposit on the size of the position. Then decide for yourself the position size.

        The tie to NLY is that NLY is leverged positions on mortgages. In other words, investors in NLY might understand currency carry-trade investments.

    • What does any of this have to do with NLY which is the site you are on??

    • Currency pairs examples.

      EUR/USD:

      A bigger number means that the euro went up and the dollar went down. A smaller number means that the euro went down and the dollar went up. Buy (to open a position) the EUR/USD if you think the euro is going up OR sell (to open a position) if you think the euro is going down.

      USD/JPY:

      A bigger number means that the dollar went up and the yen went down. A smaller number means that the dollar went down and the yen went up. Buy (to open a position) the USD/JPY if you think the dollar is going up OR sell (to open a position) if you think the dollar is going down.

      JPY/USD: This is the yen futures contract on the U.S. markets.

    • Reading various currency forecasts for 2013, it looks like the Ruble might be a safer dollar-carry-trade then the Australian dollar and that the Mexican Peso might be safer then the Ruble.

      I just tie the Australian dollar to the China GDP didn't expect a pullback beyond 1.02 . However, in the past couple of days the Australian dollar has pulled back like the Yen.

      Several currency forecasts just matter-of-fact expect slower growth and lower commodity prices in 2013. And with that the dollar rises against everything except the Yen.

      Of course a carry-trade is a long-term leveraged forex currency position for the purpose of getting the interest of a high yielding currency.

      Two other high yielding currencies are the Rupee and the Rand.

      • 1 Reply to hia_intell
      • I meant that the dollar rises against the Yen more than other currencies.

        The reason that the Yen drops is that Japan might do more QE than other countries.

        Another idea was that with QE in U.S., Europe, and Japan then emerging market currencies will rise. So they might be saying that emerging market currencies will rise if they didn't already rise too much with commodity support.

    • It looks like it's more likely to set the forex account up for 50 to 1 leverage and then take positions at 25 to 1. So that's $4,000 to hold a $100,000 position.

 
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