IB: Trade an Instrument in a Different Currency

[Avarice 10]

Can someone explain how IB handles trades in instruments that are quoted in a different currency than the account's base currency?

 

Example: My account base currency is the Euro. I have 100 EUR in my account. I go out and buy a contract of mini-sized corn on CBOT (denominated in USD). Let's say the margin requirement for this is USD 2.

 

Q1: How much buying power do I have left in my account? 100 EUR - (2 USD converted to EUR)?

 

My trade turns out to be a loser. I sell the contract and stomach a USD 4 loss.

 

Q2: How much is my buying power now? 100 EUR - (4 USD converted to EUR)? Or do I get a 2nd USD denominated balance that is now negative? If this is so, what about debit interests? If not, what EUR/USD rate do they use?

 

This is so confusing, and their site is not really helpful :missy:

 

Thanks for your help

[Tams 20]

when you make a trade outside of your base currency,

IB would "loan" you the money in that currency.

 

thus you have a base currency account,

and a secured loan in the "foreign" currency.

 

after you have closed your foreign position,

the balance is remained in the "loan" account (either positive or negative balance).

you have to do a ideal pro transaction to convert the "foreign" balance back to your base currency.

 

if you trade a lot of US instruments,

it is better to declare the base currency as US$.

you can make declaration either way any time you like.