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Comments

  1. Hello Sir, thank you for this superb lecture on Futures, really you are a gem in making complex things so simple. I have a question regarding the selling of futures if exchange rates fall. I understand that the selling is just an intangible operation because the speculator has nothing to sell, but on what basis will he have a deposit if he has nothing to sell. I mean if they are buying $100K futures, then they can Depo say $30K, but if they are selling suppose $100K again is it the same? ( That is $30K?) Also, the depo should it be in the form of cash, or can it be anything else like lien on physical assets or financial assets (leases etc).

    Moreover in terms of formalities, (not sure if this is examinable) is it as simple as a phone call? i mean if we are dealing with so much money, there’s bound to be some paper formalities? in case of lawsuit ?

    Thank u once again for your great support

    • There will be a deposit whether they are buying or selling (to protect the dealer against the possibility of the person doing the selling or buying making a loss on the deal).
      The deposit is in cash.
      There will be paperwork initially to ‘register’ with the dealer, but from then on it is as simple as a phone call.

      • Hi,

        Another well explained lecture – it is much clearer now, thank you.

        My Question is, if the transaction remains with the same risk and we are just “gambling” to cover the risk – why don’t we just put the money on a horse?
        What i mean is how is this specific to exchange rate hedging to save the risk in the transaction? It seems to me to have no connection at all?

        Thanks very much.

    • In future please ask this kind of question in the Ask the Tutor Forum, and not as a comment on a lecture.

      You should get a new books – the syllabus and the format of the exam has changed since 2010.
      If you are watching our lectures (they are a complete course for Paper F9 and cover everything needed to pass the exam) then you do not need a Study Text.
      The only book you should get is a Revision Kit, because they contain lots of exam standard questions to practice on, and practice is vital.

      First download our free Study Guide, which has links to all the lectures and details of the best past exam questions to use for practice.

  4. dear John,
    I jst repeating one of OT fellow’s question
    ”can u plz explain how does the person can sell futures now and buy later when he finds that the future is gonna down i dont understand that bit.
    Thanks in advance”?
    i also really didnt understand this bit as well? and who r the dealers r? what profits belongs to them by buying nd selling the future on behalf us? how does it work in real life? would u mind plz to talk more details about it ?

  6. Hi ,John.I have a question about the last step in money market hedging(EXAMPLE 7 about future payment).Why we need to borrow local currency in 3 months?I mean if we borrow the money in 2 months ,we still can get the money we want(4860204 pounds)now and we don’t have to pay extre interest. THX

  7. Thank you very much Joe for this breakdown and it is a very good lecture. You have brought a very good understanding on how Currency Futures can be used in hedghing the risk, but I have TWO questions relating to Currency Futures and are as follows:
    1. Does it mean that the dealer will have to exercise (sell) the futures by using the exchange rate (Fixed Rate) agreed when the speculor (Financial Manager) bought them or the dealer will have to use the current spot at that time, i.e the spot rate available at the day at which the futures matures?
    2. As you have said that the transaction should be left at risk, does it mean that the dealer will give you the fixed rate to sell the futures or you will depend on the movement of the exhange rates i.e spot rate at that day?

    Thanks very much Joe, my prayer goes to you, to your family and to Opentuition as a whole.

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