Having US bank accounts and investment accounts but living abroad for an extended time, what's a reasonable way to hedge foreign exchange rate risk? The CME futures contract for AUD has a $100k deliverable. All I would need to hedge is a few 100k. And I want forward hedges, like $100k a year for the next few years--not to receive spot. (I.e., I want to lock in the AUD value of my US investments, not liquidate and convert them to AUD.)

Fidelity, my broker, doesn't have futures, I'm pretty sure. I can open with a futures broker. But those guys' business model is typically high volume spec trading. I want to put on like 3 to 6 contracts, and that's pretty much it. I know some like IB have monthly fees for low activity. I didn't see that for, eg, etrade--but maybe that crops up if you haven't traded for a year(s)-?

I also don't know how to see bid ask spreads without already having a live account. And I think fx futures beyond the front one or two may get pretty stupid. (And rolling the front over and over would be about the same problem...)

So maybe cleared futures is not the best way-? I feel like steering clear of fx trading brokerages, because those guys not only live on volumes, but they tend to be less regulated I think, tend more to blow up, and they exploit their customers with the markets they make up themselves.

There are fx wire/transfer brokers like worldfirst, some of which offer forward contracts. Their margin is substantially higher than futures, at 10% of notional as opposed to 2 or 3%. (But still a lot better than 50% for an etf...) And in talking to one I had trouble getting them to acknowledge the possibility of closing out and settling early without delivery. (They kept saying, Its a contract you can't just cancel it. And I kept saying , Yes there would be a pnl, but if I buy and then later sell the same fx, would we settle pnl then and make me netted flat--or would I end up wearing the long and the short at the same time all the way to delivery? And they just kept saying its a contract and if I want a new contract... And that they're not a spec trading shop. Well yeah, but closing or rolling every year or few years is not for me to spec...)

So trying to minimize transaction costs, not have inactivity fees, trade on margin not actually convert, post low margin, and not have huge bid ask (or roll)--what's best for the small inactive investor to do?

So far I think cme futs will be the way to go. Since I'm not at work and don't have Bloomberg now, it took a bit to get to see quotes with no futs account. TD Trader gives "preview" access with good delayed markets. The Dec17 fut, 6AZ7, was about 30bp wide, so really not bad. Mar18 is over a cent right now but I think I might have seen it tighten up. Dec18 may be hopeless. But rolling some lots annually on a decent market isn't too painful on spreads and commissions. And again it's only 2k per 100k usd margin to post (vs 10k or 50k on other instruments). And I don't see anything about inactivity fees at some big retail futs brokerages. So hopefully I can sit on a few lots for years. Now I just need to think more about how likely AUD is to go back to $1 vs back to $0.5, from $0.73 now.

Oh and I have to look up income tax consequences too. I've never looked at the hedging exemptions or rules and whether I'd have any chance at them.

Not that it's of great interest, but for the sake of an accurate record: 1. When I said trading the one year out fut could save expenses by reducing rolls from 4/yr to 1/yr--that's stupid given that the longer terms are like 30bp wide vs 1bp for prompt, and a bp = $10. 2. Tax treatment for fx _futs_ can be elected as other futs (1265 or 12-something) which is 60% LT cap gains rate and 40% short--regardless of any actual holding period. 900-something treatment is all short term and can be elected. Of other fx instruments, some might be able to get 1265, some not. But futures type lands right on this code section. (Why you might ever not choose 1265 is, for one at least, if you anticipate offsetting fx losses against ordinary income.)

Disclaimer: this is not tax advice. It's my impression so far. I may likely miss or misunderstand things.

Just roll it every quarter. There are roll markets at the exchange that allow you do this in 1 execution and are half a pip wide for 6A.

IB is good for active trading due to low commissions, but they'll charge you $10-$20/mo. TD and all other big brokerages have ripoff commissions, but are fine if you're only doing a few trades per year, as they won't charge you monthly fees.

IB waives the monthly fee for Accounts whose Net Liquidation Value >= USD 100,000

True, inactivity fee is $10/mo net commissions generated, or $0 if net liq >= $100k. But then there a $10 basic data fee, which is only waived when $30/mo commissions are generated, or you can pay $6/mo non-waivable CME fee. Or you can trade FX which has no data fees, but will cost a **** load more in accrued interest.