- September 2014
- Posted By Ninoslav
- 0 Comments
The Foreign Exchange Market is considered by many alike a gambler’s den. You never know when one can rake in gains in matter of seconds, and also lose heavily the next moment. Other than traders’, this volatility of exchange rates can hurt many business fraternities as well, mostly those with off-shore activities. But opting for a Currency Future may well prove to be handy in this regard.
But what exactly does this term signify? It is generally a type of contract to be executed on a specific future date, and specifies a fixed currency exchange rate irrespective of the market situation. So, even if the market goes through a rough patch in the future, it will have no effect on pending payments of a business house from an off-shore client.
But is it all about the positives?
Well, every coin has two sides to it, and so does this one too. As much as the fact that futures contracts may well save you from downsides of a swinging market, it also prevents one from gaining from a market trending upward. Not understood?
You will not lose from a deal when an exchange rate falls to your peril if you have Currency Future put in place. But what about the situation if the rates are favorable to one in the future but that person is bound by a contract and has to adhere to it? You do not stand to gain anything extra as well besides not losing something.
And that is one call you have to take before opting for a Currency Future contract. One more thing, one of the currencies that typically form the basis of your exchange rate is the US dollar. Now, if this information was substantial, read into “What idea one should definitely have about Currency Pair” for a little more taste.