Foreign Currency Futures

Currency futures make the buyer of the contract to buy the long currency (numerator) by paying with the short currency (denominator) for it. The seller of a contract has the reverse obligation. The obligation of the contact is usually due on the expiration date of the future.

The ratio of currencies, bought and sold, is settled in advance between the parties involved. People make a profit or loss depending on the gap between the settled price and the real, effective price on the date of expiration.

Margins are deposited for the futures trades – cash is the important part that serves as the performance bond to make sure that both parties are obliged to fulfil their obligations.

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