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 Currency future contract is a contract for future

delivery of a specified currency against another.

 It is an agreement between two parties to exchange


one currency for another, with the actual exchange
taking place at a specified date in the future but
with the exchange rate being fixed at the time the
agreement taken into.
 Organized Exchange.
 Standardization.
 Clearing house.
 Margin.
 Marking to market.
 Actual delivery is rare.
 It is traded on organized exchange either
with a designated physical location where
trading takes place, the trading pit or via
computer screens.

 It provides a ready liquid market in which


futures can be bought and sold at any
times during the trading hours.
 Certain standards has been set
regarding 1) size of contract
2) its maturity
 Contracts are traded in whole numbers.

 For each contract, the exchange specifies a set of

delivery months and specific delivery days within


those months.
 It acts as an intermediaries.
 It guarantees performance
 It protects the contract till maturity by imposing
margin requirements on traders.
 In case of future contract every transaction is
done by the exchange member and clearing house,
so exchange requires a performance bond in the
form of margin deposited by the members who
entered into a futures commitment.

 margin value is generally between 2.5 to 10% of


the value of the contract.

 It may be in the form of cash or securities like TB,


bank letter of credit, etc.
 It means that at the end of trading session, all
outstanding contracts are re-price of that session.

 Margins accounts of those who made losses are


debited and those who gained are credited.
In case of futures actual delivery is rare because
 Futures are used as hedging device against price

risk and as a means of physical acquisition of the


currency.

 Most of the contracts are extinguished before


maturity
 Future contracts are traded by a system of open
outcry on the trading floor of a centralized and
regulated exchange or through electronic screen
trading.
 Floor trader (those who trade for their own a/c)
 Floor brokers (those who trade on behalf of others)
 Dual traders (those who do both)
 Delta hedge
 Cross hedge.
 Delta cross hedge.
 It includes
 Intra- currency spread :(exists when a
speculator buys/sales the same currency
for two delivery date)
 Inter – currency spread: (exists when the
deal involves purchase and sale of future
contracts with the same delivery date but
with two different currencies)

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