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With regards to Example 08 in Chapter 18. We buy futures now for sell later. How we come into this conclusion we have to buy now instead sell now? Please explain?
Given that they need to buy Pounds, the transaction will cost more $’s if the exchange rate increases. If the exchange rate increases then the futures price will increase also and the way to make a compensating gain is to buy futures and sell later at the higher price.
However as I explain in the lectures working through the lecture notes, example 8 is a ‘baby’ example just to explain the idea. In later examples (and in the exam) I explain the rule as to whether to buy or sell futures depending on the contract currency.
(I assume you are watching the lectures, because using the notes on their own is pointless.)
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