I just want to show you here how you can avoid negative interest on IB and how you can protect your cash against inflation.
I have a CHF IB account with about 1M CHF.
- I sell all CHF and buy USD by doing a USD.CHF forex trade. On the bottom line of the account page I see now that my CHF balance is about zero. I however have now a huge USD position and I want to avoid the currency risk.
- I hedge my USD position by buying CHF Futures (or the micro MSF Futures) so that the USD amount more or less offsets my USD position. If you buy CHF Futures, you have to roll then every 3 Months by selling the old Future and buying the Future with the next higher expiry date. The new CHF Futures are always slightly more expensive (roll yield) which is due to the negative interest rate. There is no way to avoid this negative interest rate totally, but the roll yield is about 0.25% lower than the IB negative CHF rate.
- Now I buy with all my US$ the short-term inflation protected Vanguard VTIP ETF. This one will make about 6% per year with very little risk. After this trade my USD position is about zero. Because this is a very safe ETF, the maintenance margin used to buy it is only 20% so I still can do my normal trades. As I mainly trade futures (like ES or MES for the SP500) or options on futures which do not use much margin, I never exceed 40% margin being fully invested.
Sure you can also buy other ETFs like the VT ETF instead of VTIP, or you do a mix. The good thing is that your VT position is now currency hedged.
All together VTIP is a very nice ETF for Investors which want to preserve their money against inflation. Due to very low margin requirements you can combine it with your normal investments. So on my 1M account I am invested with about 1M in VTIP and with another 1M in equity and other more volatile assets. It looks like a 2x leveraged account, but it behaves like a normal 1x leveraged account because of the very low volatility and risk of VTIP.
Happy new year! And pls. tell me how you avoid negative CHF interest.