Canadian Dollar

[TalentedTom]

I have a lot of funds mixed between CAD and USD but the CAD seems to keep increasing and appears to be on pace to overtake the USD, which would result in a lot of my US funds to lose value (since I live in Canada) my poker cashout will be worth ~20% less then they were not too long ago.

Anyone have any thoughts as to what I should do / anything that may help me get a little more insight into what the trends may be in the neat future (1-2 years). Any thoughts and constructive ideas would be appreciated, thanks in advance.

[Nomad84]

I'm not sure of the specifics of how to do it, but what you need to do is figure out how to hedge your currency exposure. What you want to do is figure out how much exposure you have to the dollar in terms of your investments, your USD denominated bankroll, and possibly a portion of your future expected poker earnings too and hedge this amount. You would want to go short USD/long CAD (I think) in this amount so that future fluctuations in the exchange rate won't affect the CAD denominated value of these assets. You'll have to adjust this hedge as the value of your USD assets changes (investments going up/down, poker earnings/withdrawals), but this should maintain your CAD spending power rather than leaving it to fluctuate with the exchange rate.

[kimchi]

I have the same problem as my primary finances are in GBP. I don't cash out/deposit regularly because Neteller's currency fees are too high.

As Barron pointed out to me a while back (correct me if I'm wrong Barron), currencies are long-term 0EV and only increase the volatility of your investments.

If you were to cash out $US into $CDN you may find that the $US suddenly starts to appreciate. I don't know where the currencies are headed although I have my own biases and opinions not worth sharing here.

I would suggest you keep the majority of your funds in the currency you spend or are paid in (providing cashout fees are low). I've lost out on the Dollar's fall too, but I keep enough $ in each account for whoring each month as the currency conversion charges/cashout fees are so high.

It's a double dildo.

[DcifrThs]

thats a great summary guys.

i opened this thread and was about to respond but said "screw it, i've responded to this exact question innumerable times."

and then you come in and summarize the situation very well.

the goal is simply to not have any significant currency exposure to speak of. developed world currencies indeed offer zero expected return, yet have a massive volatility. therefore, being exposed to their movements, while not getting compensated for it, is a major mistake in terms of your risk adjusted returns.

moving to daily life, the same logic applies.

you can execute these hedges in futures markets to a fair degree.

Barron

[kimchi]

[ QUOTE ]
I'm not sure of the specifics of how to do it, but what you need to do is figure out how to hedge your currency exposure

[/ QUOTE ]

An easy way to do this is through a CFD or spreadbetting broker (I pretty sure these aren't available in The US, but maybe you can use them in Canada).

There's a cost involved with hedging, but this can be offset somewhat:

If you short the $US against Canadian so your exposure equals that of your $US denominated poker accounts, your risk will be neutralised.

If you have $US10000 in poker accounts, then you can set aside around $200 (spot currencies often require 2% initial margin) and short the $US.

If the dollar falls, you'll make about the same from your hedge as you lost in your poker accounts.

CFD/SB brokers pay you interest on short positions (LIBOR minus a nominal % for their profit). This will be around 2-3%. This small% annual rate will be paid to you on a daily basis and should off-set the costs of dealing fees/spreads (SB are commission free, as are some CFDs).

I've never tried this, but if you have a substantial amount in $US online it might be worth looking into and doing your own dd. I did look into it when the Cable rate was around $1.85 but the amount of $US I have online wasn't really worth the hassle. (If I'd have known it would sink to $2.05, I might have made a little more effot).