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Hello Mr Moffat,
Lets say a company is expecting to receive 140M yen in 2 months time, and the company is considering hedging using futures. The contract size is based on yen. Are we supposed to buy or sell the futures?
I thought the company was supposed to sell futures, because the company will be worried the exchange rate to yen decrease(yen appreciating) kindly correct me if am wrongYou are correct.
To decide whether to buy or sell futures, you look at whether the transaction itself involves buying or selling the contract currency.
If you are receiving yen, then you would be selling yen. So if the contracts are in yen then you will sell futures. (If the contracts were in the other currency, then you would buy futures)
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