fx forward mark to market

to the CME. The marking-to-market process implies that, rather than directly purchasing or selling currency, the holder of a futures contract considers whether to maintain his long or short position everyday as the spot exchange rate changes. Suppose an initial margin of 2,000 and a maintenance margin of 1,500. For example, a futures contract on the euro and the Mexican peso has 125,000 and 500,000 units, respectively. The table summarizes the changes in the spot rate for a couple days and the associated gains/losses. In this case, purchase and subsequent sale of futures may be profitable. Your cumulative losses are 231.25 (218.75.5). In the case of the British pound, there are 62,500 units per contract. Your margin account is declined to 1,906.25 (2,137.5 231.25).

Considering the fact that your contract has 62,500 units of British pound, action forex pivot point calculator your gain is 150 (0.0024 x 62,500 which is also your cumulative gain at time. These changes result in daily gains or losses, which they are credited to or subtracted from the margin account of the contract holder. The gain of 150 increases your margin account to 2,150 (2,000 150). This article is for members only. . T 1, t 2, and so on, shows the subsequent days afterwards. While youll gain from the appreciation of the British pound against the dollar, youll take losses if the British pound depreciates. At t 2, there is a decline.0026 in the futures price (1.5710.5736 which leads to a loss of 162.5 (0.0026 x 62,500) and a cumulative loss.5 (150 162.5). In Level II economics were given the formula for the mark-to-market value of a currency forward contract. . You can end this if you sell a contract with the same maturity, in which case your net position will be zero. You can become a member now by purchasing.

Foreign Exchange Futures: Marking to Market - dummies



fx forward mark to market