Exner Graph of Long and Short Position in the Thre Month Swiss Franc Contract EXAMPLE | 5.4: A Speculative Forward Positic: Its June 5, 2013. Suppose the $/SF trader has just heard an economic forecast from the bank's head economist that causes him to oelieve that the dollar will likely appreciate in value against the Swiss franc over ‘ne next three months. If he decides to act on this information, the trader will short the three-month $/SF con- tract. We will assume that he sells SF5,000,000 forward against dollars. Suppose the forecast has proven correct, and on September 5, 2013, spot S/SF is trading at 81.0554. The trader can buy Swiss franc spot at $1.0554 and deliver it under the forward contract at a price of $1.0624. The trader has made a speculative profit of (S1.0824 ~ §1.0554) = $0.0070 per unit, as Exhibit 5.9 shows. The total profit from the trade is $35,000 = (SF5,000,000 x $0.0070) Ifthe dollar depreciated and S, was $1.0854, the speculator would have lost ($1.0624 ~ $1.0654) Unit, fora total loss of ~$18,000 ‘$0.0030 per (SF5,000,000)(~-$0.0030). Profits) USSF) Long 070 7 postion © SASiSF) 030 Sort FASISF) Peston