Currency Futures

Question 1

Step 1:

Answer 1

Calculate the number of sterling future contracts (rounded to the nearest whole number

Question 2

Step 2

Answer 2

Determine whether you want to buy or sell sterling futures

• non uk companies receiving GBP should sell sterling futures
• non uk companies paying GBP should buy sterling futures
  -uk companies receiving non GBP currency should buy sterling futures
• uk companies paying NON GBP currency should sell sterling futures

Question 3

Step 3

Answer 3

Combine steps 1&2 into a statement with the relevant future rates

Question 4

AT TIME OF transaction
Step 4

Answer 4

Buy or sell transaction currency amount on the open market at the current spot rate

If receiving currency then company will sell at spot rate - this will be positive

If paying currency then company will buy this currency at current spot rate - this will be negative amount

Question 5

Step 5 (AT time of transaction)

Answer 5

Close the future contracts and calculate profit or loss on the future contracts

Question 6

Step 6

Answer 6

Calculate net receipt

Open market receipt / payment + total profit