Strategy: Gold Currency Strategy

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Strategy: Gold Currency Strategy 2017-03-03T15:29:36+00:00
  • Author
    Posts
  • Vangelis
    Moderator
    Post count: 119

    Forum for the Gold Currency Strategy.

  • Timothy Riley
    Participant
    Post count: 5

    Very glad to see this strategy added. Some guidance on the practicalities and tax implications (for a US investor) of the various approaches to implementing it would be much appreciated. An advantage I see of the ETFs is that they are straightforward to trade; disadvantages are that CROC, EUO and YCS have fees of around 1% and give rise to K-1s. I have less experience with futures and with currency pairs. Do the tax treatments of the three approaches differ significantly?

  • florentch
    Participant
    Post count: 1

    Experimenting with the concept of this strategy, I have seen limitations with CROC daily volume (as in unfilled orders) even for balances in the 10k range, and quite similarly for YCS but starting with 100k balance.

    What is your take on these limitations and eventually how does this impact including the GCIS strategy in a real-life set-up ?

  • Charlie Moore
    Participant
    Post count: 7

    I liked this strategy idea, especially as part of a larger strategy of strategies. But I also feel it has issues with implementation, at least for me at Interactive Brokers in an IRA account.

    During opening of a position in YCS I got an error stating this security is not allowed in IRA accounts. I was able to open a position in YCS in my regular brokerage account. Apparently, IB has removed about 200 securities from IRA accounts.

    Here is what they said to me: We have implemented a restriction whereby IRA accounts will be prohibited from opening positions in a list of approx. 200 Limited Partnership securities these type of securities introduce reporting considerations and costs that we’ve concluded are not justified given the overall low level of client interest in them.
    As a result of this decision, IB is no longer accepting opening orders for such securities and we ask that you either close or transfer these positions to an IRA account maintained with another broker at your earliest convenience.

    On this list are YCS, EUO, CROC, and UUP. I have the full list if anyone is interested.

    Would it make sense to buy puts on FXY?

    • Alexander Horn
      Keymaster
      Post count: 263

      IB has restricted three times leveraged ETF from their IRA accounts. You can instead use non-leveraged ETFs and increase their allocation to keep the intended leverage ratio. This dilutes the overall effect in the portfolio, e.g. you need to allocate less to GLD to keep 100% overall, but is the only way currently.

      Alternatively, you can buy the 3x ETF in a non-deferred account as you mention. Buying puts also will not be allowed in your deferred account, and doing so in a regular account requires very good knowledge of the “greeks”.

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