No longer are the world's currency markets the
exclusive domain of the largest banks and multinational corporations.
Through Terra Nova, traders and investors can trade currency contracts
and have access to the world of foreign exchange.
Currency Futures Offerings
Terra Nova presently offers
trading within the following currencies:
|
TAL
Symbol |
Currency |
Contract Size |
Tick Value |
Tick Increment |
| /6A |
Australian Dollar |
100,000A$ |
$10 |
.0001 |
| /6B |
British Pounds |
62,500BP |
$6.25 |
.0001 |
| /6C |
Canadian Dollar |
100,000C$ |
$10 |
.0001 |
| /6E |
Euro FX |
125,000euro |
$12.5 |
.0001 |
| /E7 |
E-mini Euro FX |
62,500 euro |
$6.25 |
.0001 |
| /6J |
Japanese Yen |
12,500,000Y |
$12.5 |
.000001 |
| /6S |
Swiss Franc |
125,000SF |
$12.5 |
.0001 |
| /6M |
Mexican Peso |
500,000 Mex. pesos |
$12.5 |
.000025 |
Hours of Currency Futures Trading
Terra Nova will allow trading in these products from 5:00pm
to 4:00pm CST the next day (Sunday- Thursday).
Daily trading ends at 4:00pm CST and reopens at 5:00pm CST. Trades
made after 5:00pm are dated as of the next day.
What
is a Currency Futures Contract?
Currency futures are standardized financial contracts traded on
exchanges and through electronic networks like the Chicago Mercantile
Exchange (CME) and their GLOBEX® system. Currency futures
are quoted in dollars per unit of foreign currency at the Chicago
Mercantile Exchange. To determine the dollar value of a futures
contract, simply multiply the contract size by the current price.
For an example, the Swiss Franc Futures contract
traded at the CME represents 125,000 Swiss Franc. At the price
of $0.6010 USD/SF the Value of the contract would be $75,125
USD ($0.6010 x 125,000).
Now suppose that the price of the Swiss Franc currency future
moved to $0.6020, the holder of the contract has profited from
the increase in the value of the contract from $75,125.00 USD
to $75,250.00 or $125.00.
Another way to calculate the same change in value would be
to multiply the change in price (in ticks) by the value of a
single tick. The value of a tick is set by the exchange and
represents the minimum price fluctuation for a particular contract.
The minimum fluctuation (tick) of the Swiss Franc contract is
.0001 and the value of that tick is $12.50. In our example the
price moved from .6010 to .6020 or 10 ticks or $125.00 (10 x
12.50)
Margin
Due to the fact that these are highly leveraged instruments, a
thorough understanding of margin is a crucial concept when trading
currency futures. During each trading day, a currency futures
trading account is marked-to-the–market for any losses or
gains. These losses or gains are then immediately debited or credited
from/to the account.
For instance, a Terra Nova customer with a
$12,000 account balance purchases 6 September Swiss Franc contracts
at an opening price of $.7004 USDSF. The total dollar value
of the contracts are: (one Swiss Franc contract contains 125,000
Swiss Francs) $.7004 X 125,000 X 6 = $525,300. The current initial
margin for the position is $10,938 ($1,823 margin for one contract
X 6 contracts = $10,938). Since the account balance is $12,000,
the initial margin requirement has been met with the cash in
the account. Please note that Terra Nova enforces minimum
exchange margin requirements for all overnight positions. These
requirements are subject to change at any time without notification.
Please consult the exchange website for up-to-date margin information.
In the second day of trading, the settlement price declines
to $0.6975. The price of one contract has dropped 0.0029 or
29 ticks, resulting in a loss of $362.50 per contract and $2,175
on six contracts. The value of the contracts is now $523,125.
(0.6975 X 125,000 x 6 = $523, 125) The total value of the 6
contracts has declined from $525,300 to $523,125 or a loss in
value of $2,175. This amount is deducted from the account as
profits and losses are continually marked to the market throughout
each trading day. The total account balance is then $12,000
- $2,175 or $9825. The current maintenance margin on one September
Swiss Franc contract is $1,350. The maintenance margin on the
six-contract position is therefore $8,100 ($1,350 X 6 = $8,100).
As the account balance is above the maintenance margin of $8,100,
no action is required on this account.
Suppose now that the settlement price at the end of the following
trading day is $.7009 (an increase in the settlement price).
The price of the contract has increased by 0.0034 (34 ticks
per contract) resulting in a gain of $425 per contract (12.50
x 34) or $2,550 for the six-contract position ) ($425 X 6).
The value of the contracts is now $525,675 (0.7009 X 125,000
X 6). The value of the account has increased by $2,550 to $12,375
($9,825 + $2,550 ). As the account balance is above the maintenance
margin of $8,100, no action is required on this account.
Instead of the gain noted in the previous paragraph, suppose
the next day there was a drop in the settlement price to $0.6850
from $0.6975. The price of the Swiss Franc contract decreased
0.0125 (125 ticks) resulting in a loss of $1,562.50 per contract
($12.50 X 125) and $9,375 ($12.50 X 125 X 6) on six contracts.
The value of the contract is now $85,625 ($0.6850 X 125,000)
and the value of the six-contract position is $513,750 ($0.6850
X 125,000 X 6). The value of the account has decreased to $450.
Since the account value is lower than the current maintenance
margin of $1,350 for each contract, the customer will be required
to bring in at least $10,488 to meet the initial margin requirement
to continue holding the full six-contract September Swiss Franc
position ((1,823 X 6) – 450)
To view the most current margin rates for currencies, please
click
here. Unless you currently hold the underlying commodity,
be sure to look at the ‘spec’ (or speculator) performance
bond figure.
Expiration
and Delivery of Currency Futures Contracts
Since currency futures contracts are delivered in the respective
foreign country’s currency upon expiration, Terra Nova
does not allow a currency futures contract to be held to the expiration
date. To prevent a currency futures contract from expiring within
a customers’ account, Terra Nova requires that customers
either liquidate or roll their position to a contract with a later
expiration date. Initial margin will be raised to 100% roughly
one week prior to expiration.
For more information on the expiration dates for the current
contract, please click
here.
Roll
Dates
Roll Dates are days when traders switch their focus from a contract
that is due to expire to the next available contract month. The
new contract then becomes the ‘lead’ or most actively
traded contract. After this date the liquidity in the contract
that is due to expire may drop off quite dramatically. For this
reason, anyone wishing to initiate a new position should do so
in the new contract month. People with existing positions in the
expiring contract month should have already rolled their position
into the new lead contract or prepare to liquidate their position.
For example, if you are long a March 2003 Swiss Franc contract,
on March 10, 2003 you should have sold that contract and have
bought a June 2003 contract to “roll” your position
to the next contract month (June 2003) or plan to sell your remaining
March contact and exit that position.
To view the roll dates on the CME website, please click
here
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