- This topic has 6 replies, 2 voices, and was last updated 2 years ago by
.
- Posts
determination of whether buying or selling the future depends on the contract size currency right? so lets say the contract size currency is denominated by dollars and I’m receiving 1 million Euros, I will be selling futures right? Also does the place of where the company is operating effect the determination of buying or selling(Exam purpose only)
It depends what currency the company operates in (which will usually be determined by the country in which they operate, but does not have to be).
If the company is receiving Euros then presumably (but you have not said) the company needs to convert them to dollars (otherwise they would not be using dollar futures).
Converting the Euros to Dollars means that they will be selling Euros and buying Dollars. Therefore they will buy Dollar futures.
Have you watched my free lectures on foreign exchange risk management, where I do explain this with examples?
It depends what currency the company operates in (which will usually be determined by the country in which they operate, but does not have to be).
If the company is receiving Euros then presumably (but you have not said) the company needs to convert them to dollars (otherwise they would not be using dollar futures).
Converting the Euros to Dollars means that they will be selling Euros and buying Dollars. Therefore they will buy Dollar futures.
Have you watched my free lectures on foreign exchange risk management, where I do explain this with examples?
I have, but I’m getting very confused again and again so now the logic I set in my mind is that the contract size currency is home currency. Example: Contract size currency is £ and I operate in the UK, if I receive $, I sell futures(because the foreign currency is being received) Is this risky to go ahead with this in the exam? I am getting the answer right so far. Except in one instance which was Nutourne Co in Dec 2018 pastpaper.
If the transaction involves buying the contract currency, then you buy futures.
If the transaction involves selling the contract currency then you will futures.
In Nutourne the contract size if quoted in CHF.
The transaction involves receiving CHF so they will be selling CHF in order to buy $’s. Therefore they will sell CHF futures.
Again, have you watched my free lectures on this?
- The topic ‘Futures’ is closed to new replies.