futures

Have you watched my lectures properly? Because I cannot type out the whole lecture here!!

You buy and sell futures in exactly the same way as you buy and sell shares – from a dealer, on an exchange (the futures exchange or the stock exchange).

Futures prices move up and down just as exchange rates move up and down. The way we use them is to ‘gamble’ on a futures deal such that if the exchange rate moves against us (and we therefore lose money on the transaction) then we make a compensating profit on the futures. If the exchange rate moves in our favour and we make a gain on the transaction, then we make a compensating loss of the futures deal.
We use one risk (that on the futures) to ‘cancel’ the risk on the transaction.

In my lecture I go through a simple numbers example to make it clear (even though you obviously cannot be asked calculations on futures in the F9 exam).