A transferable futures contract that specifies the price at which a specified currency can be bought or sold at a future date.
Currency future contracts allow investors to hedge against foreign exchange risk. Since these contracts are marked-to-market daily, investors can--by closing out their position--exit from their obligation to buy or sell the currency prior to the contract's delivery date.
Partner Sites
Currency future
Navigate Page
Managed Forex
Forex Forums
Forex Strategies
Forex broker ratings
Forex Charts
Easy forex training
Easy Forex Mentoring
Managed Forex
Forex Forums
Forex Strategies
Forex broker ratings
Forex Charts
Easy forex training
Easy Forex Mentoring
| · | Forex Chart |
| · | Investing in Oil |
| · | Currency Exchange Rates |
| · | Currency Exchange Calculator |
| · | Forex Analysis |
| · | Forex Israel |
Categories:
Other Pages:
| · | Home |
| · | Learn Forex |
| · | Forex Strategy |
| · | Forex Software |
| · | Forex Signals |
| · | Forex News |
| · | Forex Forum |
| · | Forex Broker |
Latest Articles:
Realated articles about trading gold and silver
| · | Gold Trading Systems |
| · | Gold trading UK |
| · | Gold Eexchange Funds |
| · | Methods Investing Gold |
Forex Interest Rates - Account forex - cfd trading - commodity trading - currency chart - currency market - currency rates - currency usd - daily forex - day trading - exchange currency - foreign exchange trading - forex broker - forex brokers - forex chart - forex charts - forex exchange - forex forecast - forex futures - forex market - forex options - forex platform - forex quotes - forex rates - forex real time - forex realtime - forex signal - forex signals - forex strategies - Forex swap - forex trade - forex trader - forex traders - futures trading - fx currency - fx forex - fx trading - gft forex - managed forex - oanda currency - option trading - stock trading - swing trading - trading options -Easy Forex Affiliate -currency trading uk - six major currencies -
Easy Forex
Currency Futures Trading
Currency Trading Tips
Mini Forex Accounts
Forex Platforms
Trade Gold
Currency Futures Trading
Currency Trading Tips
Mini Forex Accounts
Forex Platforms
Trade Gold
Subscribe to this Advanced Super easy forex course
If you have successfully completed the basic Forex course...
FREE forex course that will give you all the information you need.
For traders who want to speed up the learning curve...
A currency future, also FX future or foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date. Typically, one of the currencies is the US dollar. The price of a future is then in terms of US dollars per unit of other currency. This can be different from the standard way of quoting in the spot foreign exchange markets. The trade unit of each contract is then a certain amount of other currency, for instance €125,000. Most contracts have physical delivery, so for those held at the end of the last trading day, actual payments are made in each currency. However, most contracts are closed out before that. Investors can close out the contract at any time prior to the contract's delivery date.
Settlement and Delivery
As currency futures are based upon the exchange rates of two currencies, they are settled in cash, in the underlying currency. For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of $125,000 worth of Euros in cash. Note that this only happens when the contract expires, and as day traders do not usually hold futures contracts until they expire, they should not be involved in the settlement, and will not receive delivery of the underlying currency.
Popular Currency Futures
Many of the most popular futures markets that are based upon currencies are offered by the CME (Chicago Mercantile Exchange), including the following :
EUR - The Euro to US Dollar currency future
GBP - The British Pound to US Dollar currency future
CHF - The Swiss Franc to US Dollar currency future
AUD - The Australian Dollar to US Dollar currency future
CAD - The Canadian Dollar to US Dollar currency future
RP - The Euro to British Pound currency future
RF - The Euro to Swiss Franc currency future
As currency futures are based upon the exchange rates of two currencies, they are settled in cash, in the underlying currency. For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of $125,000 worth of Euros in cash. Note that this only happens when the contract expires, and as day traders do not usually hold futures contracts until they expire, they should not be involved in the settlement, and will not receive delivery of the underlying currency.
Popular Currency Futures
Many of the most popular futures markets that are based upon currencies are offered by the CME (Chicago Mercantile Exchange), including the following :
EUR - The Euro to US Dollar currency future
GBP - The British Pound to US Dollar currency future
CHF - The Swiss Franc to US Dollar currency future
AUD - The Australian Dollar to US Dollar currency future
CAD - The Canadian Dollar to US Dollar currency future
RP - The Euro to British Pound currency future
RF - The Euro to Swiss Franc currency future
Hedging
Investors use these futures contracts to hedge against foreign exchange risk. If an investor will receive a cashflow denominated in a foreign currency on some future date, that investor can lock in the current exchange rate by entering into an offsetting currency futures position that expires on the date of the cashflow.
For example, Jane is a US-based investor who will receive €1,000,000 on December 1. The current exchange rate implied by the futures is $1.2/€. She can lock in this exchange rate by selling €1,000,000 worth of futures contracts expiring on December 1. That way, she is guaranteed an exchange rate of $1.2/€ regardless of exchange rate fluctuations in the meantime.
Speculation
Currency futures can also be used to speculate and, by incurring a risk, attempt to profit from rising or falling exchange rates.
For example, Peter buys 10 September CME Euro FX Futures, at $1.2713/€. At the end of the day, the futures close at $1.2784/€. The change in price is $0.0071/€. As each contract is over €125,000, and he has 10 contracts, his profit is $8,875. As with any future, this is paid to him immediately. Edit: Quoting for FX Futures at CME is in €/$ not $/€!
More generally, each change of $0.0001/€ (the minimum Commodity tick size), is a profit or loss of $12.50 per contract.
Investors use these futures contracts to hedge against foreign exchange risk. If an investor will receive a cashflow denominated in a foreign currency on some future date, that investor can lock in the current exchange rate by entering into an offsetting currency futures position that expires on the date of the cashflow.
For example, Jane is a US-based investor who will receive €1,000,000 on December 1. The current exchange rate implied by the futures is $1.2/€. She can lock in this exchange rate by selling €1,000,000 worth of futures contracts expiring on December 1. That way, she is guaranteed an exchange rate of $1.2/€ regardless of exchange rate fluctuations in the meantime.
Speculation
Currency futures can also be used to speculate and, by incurring a risk, attempt to profit from rising or falling exchange rates.
For example, Peter buys 10 September CME Euro FX Futures, at $1.2713/€. At the end of the day, the futures close at $1.2784/€. The change in price is $0.0071/€. As each contract is over €125,000, and he has 10 contracts, his profit is $8,875. As with any future, this is paid to him immediately. Edit: Quoting for FX Futures at CME is in €/$ not $/€!
More generally, each change of $0.0001/€ (the minimum Commodity tick size), is a profit or loss of $12.50 per contract.
Currency future Use
Forex Search
With the search, you can search currency exchanges, banks, forex brokers, and other information listed and featured at Easy Forex Forum.
With the search, you can search currency exchanges, banks, forex brokers, and other information listed and featured at Easy Forex Forum.
Recommended Forex Courses
We have five different forex currency trading e-Books for you
For Beginners new to the forex market - Click Here
For Advanced forex traders: Click Here
For Super Advanced forex traders: Click Here
For News Traders: Click Here
For Lazy Traders: Click Here
For Beginners new to the forex market - Click Here
For Advanced forex traders: Click Here
For Super Advanced forex traders: Click Here
For News Traders: Click Here
For Lazy Traders: Click Here