Hi guys, can somebody explain with a detailed calculation how the ‘FX Impact’/exchange rate is worked out.
Is it calculated on the profit element only or the whole investment?
My Nio position is currently this:
Current price $47.35
500 shares average price $44.53
£17,049.75
Gain +£1,013.90 (6%)
FX Impact -£884.41 (5.23%)
Return +£129.25 (0.76%)
Is this correct?
Simple example:
you buy 1 share of company X for $100. GBPUSD is 1.00 (1 GBP = 1 USD).
So you own 1 share worth 100 GBP (which is $100 too)
GBPUSD rises to $1,20. So 1 GBP is $1,20. The price of your share is still $100. No change.
In GBP your position now is 83.33 GBP in worth. Return -16,67 GBP.
If you have the patience to read there is a long post of explanation
A key issue is that share price return and fx impact are multiplicative factors, but for convenience the app has been programmed to show them as additive.
GAIN/LOSS as shown in the app
expresses the gain/loss in US dollars, converted to GBP at today’s exchange rate.
Tell me if you understand this point about the difference between multiplicative and additive effects. Or can better explain it!
I think what I’m trying to say is based on my figures above can someone show me how we arrive at the fx impact figure of -£884.41
I think what I’m trying to say is based on my figures above can someone show me how we arrive at the fx impact figure of -£884.41
I’ll understand it better if I can see the math!
The app will break this down as GAIN/LOSS 0 and FX IMPACT -16.67
Ok, so show me the calculations where we arrive at -£884.41 FX Impact
I think it is this
GAIN = 500 x (47.35 - 44.53)/1.39067 = 1013.90
(assuming current xe rate is 1.39067)
RETURN is 17049.75 - 16920.50 = 129.25
(assuming original purchase cost was £16920.50)
FX IMPACT = RETURN - GAIN = -884.65
This does not quite match the -884.41. It may be because of some rounding that Trading 212 do when calculating average purchase price.
It is the Current value
(I have now edited the above post to use this clarification, Richard.W)
Richard, Thanks for taking the time to explain and calculate, Very much appreciated.
Did you buy them on different days? If so then no…
Perhaps this graph will help:
@Gavin212 , each transaction have a different exchange rate (could coincidentally have the same, but is somehow less probable).
If you want to control the FX impact, you could do an Excel file with all your transactions, the History’s CSV file could assist you.
Yeah I’ve kind of figured that out now, thanks for all the replies…