Currency Futures
Some Features of Currency Futures
Here are some information we should know in forex trading.
Ø Size of contract – called the notional principal, trading in each currency must be done in an even multiple.
e.g. Available futures contract size (CME):
Australian dollar/100,000
British pound/62,500
Canadian dollar/100,000
Chinese yuan/1,000,000
Euro/125,000
Japanese yen/12,500,000
Swiss franc/125,000
Ø Method of stating exchange rates – “American terms” are used; quotes are in US dollar cost per unit of foreign currency, also known as direct quotes
Ø Maturity date – contracts mature on the 3rd Wednesday of January, March, April, June, July, September, October or December
Ø Last trading day – contracts may be traded through the second business day prior to maturity date.
Ø Collateral & maintenance margins – the purchaser or trader must deposit an initial margin or collateral; this requirement is similar to a performance bond.
– At the end of each trading day, the account is marked to market and the balance in the account is either credited if value of contracts is greater or debited if value of contracts is less than account balance
Ø Settlement – only 5% of futures contracts are settled by physical delivery, most often buyers and sellers offset their position prior to delivery date.
The complete buy/sell or sell/buy is termed a round turn
Ø Commissions – customers pay a commission to their broker to execute a round turn and only a single price is quoted.
| http://joyforex123.blogspot.com/2012/03/margin-and-mark-to-market.html |
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