Wednesday, February 26, 2014

Newbie's IB Portfolio - Short Gold! OMG!!!!

Newbie has always hated Gold because it is a 'yieldless' security. Newbie has always hated Gold because it has few practical purposes other than being worn as jewellery, ok maybe a little bit of industrial use.

Finally Newbie is able to put his money where his mouth is and SHORT GOLD!

Using IB platform, I have today SOLD 10 ounce of XAUUSD (termed London Gold in IB) at a price of USD1,344.14, with commission charges of just USD2.

Thus, every USD1 movement in the XAUUSD price would have a USD10 P&L impact for me.

Update at 5pm: It's really OMG! I had a livechat with IB and I discovered a few shockers. Halfway in the conversation, I was so dismayed that I closed my Short Gold position at a small gain of USD20. So what did I discover?

The USD cash that you received from shorting the Gold cannot be used for anything!
a) It cannot improve your Excess Liquidity.
b) It cannot offset your current USD loan (e.g. I have a USD150k loan, I received USD20k cash from   the Short Gold position, I still have to pay loan interest on the full USD150k loan).

Reason for this according to IB is because the metal trades are done in the UK account which is separate from the main securities account, blah blah blah.

So long story short, the USD cash you received from shorting the gold is trapped in the UK account and is useless and sitting idle in the UK account.

To add insult to injury, after I realised the USD20 profit from closing out my short position, IT DOES NOT AUTO CREDIT my main securities account. Tomorrow, I have to go into the UK account and manually transfer the USD20 cash from the UK account to my main securities account.

I closed my short position by buying back XAUUSD at  USD1,341.69. Yeah! My first realised profit in IB, and I now see a USD21 realised P&L in my Account Screen.

Conclusion: No more gold trading with IB, especially since I am a bear on gold, and it makes no sense to short gold in IB when I cannot do anything with the USD cash I receive.

No comments: