A 'Currency Future' is an agreement to buy or sell a standard quantity of a specified currency, at a specified price, on a specified future date.
Futures contracts are a type of forward contract, meaning they represent a pledge to make a certain transaction at a future date. Futures are distinguished from over-the-counter (OTC) forward contracts in that they contrain standardised terms; trade on a formal exchange; are regulated by overseeing agencees; are guaranteed by clearing houses; have a range of delivery dates; are settled daily.
Here is some more information about the different types of accounts you are able to open at ForexCT
Terminology
Currency futures are traded in a standardised, transferable parcels called contracts. They are governed by their contract specification which details the size of each contract, when delivery is to take place and what exactly is to be delivered.
The contract unit or size specifies the amount of underlying currency to be delivered per contract. This is also known as the 'face value' of the contract.
The 'futures price' is one at which the two counterparties in a futures contract agree to transact at/on the settlement date. In terms of a currency future, this is usually a calculated arithmatic mean of a range of price quotations on the last trading day prior to settlement date. Prices are quoted in terms of USD per currency.
The 'last trading day' is the last business day prior to settlement date in the delivery month.
The 'settlement date' is the date of completion and execution of the terms of the contract - in this case the delivery of the underlying currency.
The 'delivery month' is the month during which a futures contract expires, and during which delivery may take place according to the terms of the contract. For currency futures this is usually march, June, September, and December.
A 'tick' is the smallest permitted price movement in a future contract. As each futures contract is a standardised size, the smallest price movement is known as the 'tick value'.
A currency futures contract can be 'closed' out by making an offsetting trade, or taking delivery of the underlying currency.
There are 2 parties to a currency futures contract - a buyer and a seller. The buyer of a future enters into an obligation to buy the foreign currency on a specified date. The seller of a future is under an obligation to sell the foreign currency on a future date.
The risk to the holder of the currency future is unlimited, and because of the payoff pattern is symmetrical, the risk to the seller is unlimited as well. Loss and gains by each party on a futures contract are equal and opposite. In other words, futures trading is a 'zero-sum game'.
The clearing house acts as an intermediary in futures transactions as it guarantees the performance of each party to the transaction. In order to ensure that payment occurs, futures have a 'margin requirement' or 'clearing margin'. This margin is calculated as the difference between the current value of futures position (mark-to-market) and the position value at the time purchase/sale. This margin is calculated and settled daily with the clearning house - the form of payment/receipt into each parties account.
You are only minutes away from being apart of a $1.9 Trillion market! Start trading Forex today!
Subscribe to:
Post Comments (Atom)
1 comment:
However, it must be noted that this price will probably be higher over these stores and you could
have to wait until a sale offer is happening or the item is available at discounted price.
This 45-piece set is costing around $70, and provides service
for eight people. Considering this can be something that you simply are going to be wanting to use for many years, and lastly something that you use daily, it is just a good idea
to acquire something built of good quality standards.
Here is my webpage - flatware
Post a Comment