How do I calculate the carry trade on any pair? Let’s say my lot/position size is $0.10. What’s the math formula that’s used in general for interest rate on all major currency pairs?
(interest rate differential ± broker markup) * position size/365 this is overnight swap you receive or pay.
Interest rate differential = interest rate (currency you buy) - interest rate (currency you sell)
I still don’t quite understand. Could you put it into a mathematical equation for me? Like using real numbers.
US rate - 1%
Russia rate 6%
IR differential is 6-1=5%
lets suppose broker markup is 2%
position size = 2 lots (200 000 USD)
holding period = 3 days
Position: SELL USDRUB 2 lots
then swap = (0.03* 200 000 /365)*3 = 49.31 USD