Now that we have Strategies listed within Accounts, I have connected a model that trades Canadian companies. I know that I have to enter trades manually with IB (Is that because of IIROC regulations?) but my issue is that the port uses a hedge and my only choices are US securities. I have it set to TLT but I’m trading XLB:CN in it’s place. Since P123 doesn’t support Canadian ETF’s there is no way for me to enter that trade within the Strategy, nor can I create a separate manual strategy that just trades in and out of that ETF. What this ends up doing is leaving huge gaps in the performance graph of the Account because IB sends the info to P123 that the money in the account is “gone” but really it’s just sitting in a security that P123 doesn’t recognize. Can anyone think of a way around this issue?
I’ve no ideas on your actual question, but I’m curious about what you think of the relative performance of TLT versus XLB. I’ve been thinking along the same lines, but I’m seeing a much weaker negative correlation with XLB and the overall market than there is with TLT.
The alternative is hedging with TLT directly and taking on the currency risk, or doing it on margin and paying the interest rate differential (this is what I’m doing atm, buying TLT on margin and leaving a CAD cash balance in the account to offset it).
XLB:CN is less volatile than TLT IMO but the correlation is still quite good considering one is Canadian and one is US long bonds.
Your suggestion of margin is ok but then you would be faced with a carry cost to hold the margin open. Does the cost of margin out weigh the cost of currency spread? IB would charge me 3.8% for margin interest and the CAD/USD spread cost is about 0.5pip.
So if I was trading $100K into the model and it went to 50% hedge for lets say 2mths:
Margin = 50k*(0.038/6)=$316
FX = 50k0.000052=$10
It’s a pretty big gap but let me know if I made a mistake. With FX it’s possible you could even make money but I won’t go down that road since we can’t model that here on P123.
Would be nice if P123 added Canadian etf’s. As for your I.B. account you can buy the US dollar in your account and hold it as a position. You can then trade TLT with no interest and lower commissions(.010 vs .005). Your chart would be fixed but you would have currency risk holding the US dollar.
I have done that in the past but it doesn’t really “fix” the chart. When you hold mixed currencies IB can do the math and total it properly but P123 doesn’t recognize the currency exchange difference and only reports it as a value that is added to the aggregate. So with a 30% difference in the reported dollar you get a 30% gap on your charge for the value of US converted. I’m sure P123 has bigger fish to fry right now but at some point it would be great to either add Canadian ETF’s or at least be able to recognize the difference between CAD and USD.
I suspect that I know what the problem is, but can you please send me a link to the system in question?