Well Paul, since you are new at this game, I'll be gentle. Yes indeed one way to trade for Canadian Dollars is to go into a US Bank and in a very loud voice, tell someone (anyone) that it is vitally important that you convert all of your money into CDN currency as quickly as possible. After a few banks see this happen a panic will likely ensue thereby raising the value of Canadian currency almost overnight. You then go into another bank, and trade your money back into US dollars. So, Great Llama what are you doing over here in uncharted waters. If you are serious, you can ask your broker if they trade futures on currencies....I doubt it, if they are primarily a stock & bond place. However, there are several brokerages which will open you an account for as little as a couple of thousand $. The entry price for a contract of Canadian dollars is about $600-650 and for that you will control 100,000 CND Dollars, deliverable in say, December, 96. In addition to the $600 purchase price, you will have to keep some money on account as "maintenance" as insurance for price movements against your position. This minimum maint. is now about $450.
Now for an example. Let's say you buy a contract of Dec, CDN $ for an exchange rate of 73.00 (that is, each CDN dollar is trading at .73 for 1 US dollar. On your first day of trading the value of the CDN Dollarfalls to .7265. That would equal a $350 move against your position, and the brokerage house has to take $350 out of your account at the end of the day....it essentially goes to someone who actually "won" on the day in question. ALL accounts are settled at the end of each trading day...very important. Let us now say that after your first day of trading, while you are sitting in the kitchen and Penny is screaming at you about being such a worthless bag uf moose dung, but unbenounced to you, up north...Jean Cretien has resigned and sucessfully urged his followers to appoint Milton Friedman as interim Prime Minister and.....over in Quebec, Lucien Bouchard is completely consumed by the little critters who only got his leg last time....an dwhat happens: These are both good signs for the Canadian dollar. The next morning trading jumps up exponentially and finishes the day at a new eight year high of .82.00. For Paul, this means his original $650 investment is now worth... a little over $9,000 (US). He sells out and calls for the cash. Penny is humbled, but you still invite her on a trip to New Zealand to meet with all of the rest of the SI Thread idiots who were sharp enough to play the game with as much skill as you, and all decided to take some time off.
Do you get my drift as to how this is done? Well oK, perhaps I have embellished the process a little. Also.....there is the outside chance that on day #2, Cretien announces his hidden membership in the Canadian Nazi Party (hell it would probably still go up at this point) and that Bouchard releases the new Quebec 1000 Franc note with is own picture on it. This of course might have the effect of deflating the value of your investment. There is risk of loss in the futures markets....past performance are not really worth a bag of moose dung.
Regards....Grasshopper |
