Hi Cap
I understand the carry trade, the leverage available, that you can make the spread between two currencies interest rates and then leverage that for something like 50% interest rates.
I understand that FOREX allows a relatively small investor to get involved with this.
QUESTION:
If you were doing Japan/ Us Dollar , with being long the dollar I guess to capture the higher interest rate, If the Yen was 120 to the dollar, and you put $1000 into one of these contracts, how much would you lose if the Yen went to 119 to the dollar? ( I know I have the scale of this all wrong and you are probably doing $1,000,000 in currancy by investing $1,000 so each one point move in the yen is 1000 yen or $8 + )
If you need to put up $100 for that $1000 investment and there is a 4% interest rate spread then your getting a 40% return if the currencies don't change? What do the real # work out to be?
Have you looked at DBV ? Would that be of any use for you to trade? Probably no way for you to get the leverage you want.
Toofuzzy
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