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Dear, Mr Moffat
Hope my message finds you well.
Regarding futures instead of finding out whether buying or selling which is the first step.
Rather we simply find out how many blocks of contracts we need * difference in future exchange * contract Value. The amount resulted is either our profit or loss . To know whether we made profit or loss on futures hedge.
If we simply see in which direction the currency exchange spot moved. If we made a loss on currency exchange movements then in the above paragraph the amount would be a profit and vice versa.
Is this a neat way of going around it?
Additionally I could not find a single question in Kaplan kit regarding futures. What topic are tested of examiner wishes to give currency instead of interest in March
If I understand you correctly, then I am astonished that you cannot find a single question in the Kaplan Kit regarding futures. Every exam has a question on either foreign exchange risk management or interest rate risk management, and in almost all of them the use of futures is asked.
I am afraid there is no ‘neat’ way for going about it – there will be marks for stating whether futures are being bought or sold.
I explain in my free lectures how we decide immediately whether to buy or sell futures.
Yes I was watching your lecture in which u stated later u would narrate an easy way of doing it but the that lecture without mentioning of such. Could u plz tell the lecture number
Ok but we can work out the answer without knowing if we are buying or selling?
Does the currency in which the contract is, influences whether we are buying or selling?
Because in two examples I did in Kaplan textbook. We were receiving foreign cash and paying foreign cash . In both the cases we sold
@nikaido said:
Yes I was watching your lecture in which u stated later u would narrate an easy way of doing it but the that lecture without mentioning of such. Could u plz tell the lecture numberlecture ended without mentioning such
I certainly do explain how to decide!!!
It depends on what currency the contract size is quoted in.
Suppose the company works in dollars and are receiving Euros. To convert euros to dollars you would need to sell euros. Therefore if the contract size is quoted in euros then we sell futures.
If however the contract size was quoted in dollars then you would buy futures (because to convert euros to dollars we need to buy dollars).
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