Swap Carry Through Cross-Account Locks and Synthetic Positions
Summary
The article examines whether swap payments can contribute to returns and describes locking positions across accounts with different swap schedules. It argues that holding offsetting positions can reduce exposure to price direction while the combined swaps may be positive, particularly when both sides pay a positive swap. It also explains how currency pairs can be represented as relationships among currencies, then combined into synthetic positions using other instruments. These relationships can help calculate the component positions and their volumes.
The proposed method seeks to improve on a simple two-account lock by choosing combinations of instruments whose net swap is favorable. The article describes a utility for working with these combinations and says initial tests are part of the wider discussion, but the supplied text does not give detailed results. Practical outcomes depend on broker swap tables, spreads, commissions, margin, and the ability to maintain and fund offsetting positions. The author’s claims of predictable or risk-free profit are not established by the evidence presented, and swap conditions can change.
Key ideas
- Swap payments and charges can materially affect the cost or return of positions held overnight.
- A two-account lock uses opposite positions where the accounts’ combined swaps may be favorable.
- Currency relationships can be combined to construct synthetic positions from multiple instruments.
- Position volumes must reflect the currency amounts represented by each component trade.
- Broker terms, transaction costs, funding needs, and changing swaps limit the strategy’s claimed predictability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.