Currency Futures
Exchange-traded contracts specifying the price at which a currency will be bought or sold and the date of the exchange; the holder at expiry is legally obliged to transact at the contracted price and date. Unlike privately negotiated, customisable forwards, futures are standardised, highly regulated and priced off a future potential market price rather than the current spot price.
Related terms
Forward Contract
An agreement to exchange a set amount of one currency for another at a fixed rate on a future date. It locks in today’s rate, protecting a business from adverse currency moves before a payment falls due.
Read full definitionExpiration Date
The last day a derivatives contract, such as an option or future, is valid. Before or on this day, traders decide what to do with their position.
Read full definitionDerivative
A financial security whose value derives from one or more underlying assets. Common derivatives are futures, forwards, options and swaps; they are often traded over the counter, can be exchange-traded and are frequently leveraged.
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Call Option
A financial contract giving the right, but not the obligation, to buy a market at a specified price within a specific time. The buyer of a call option can profit when the underlying market rises in price.
Read full definitionContract for Difference (CFD)
A financial contract in which you agree to exchange the difference in price between the opening and closing of a trade on a particular asset. CFDs enable traders to speculate on whether a market will rise or fall and profit from price movement without owning the underlying asset.
Read full definitionDelta
A ratio comparing the change in an option’s price to the change in the price of its underlying asset. If an option’s delta is 0.50 and the underlying rises by $1 per share, the option’s price will rise by about $0.50 per share.
Read full definitionFX Option
The right, but not the obligation, to buy or sell currency at a specified rate (the strike price) on or before a specific date. Options provide flexibility in currency hedging strategies.
Read full definitionImplied Volatility
The market’s expectation of future volatility derived from option prices. Higher implied volatility suggests greater expected price swings.
Read full definitionKnock-In Option
A type of options contract that only becomes active once the underlying reaches a predetermined price; until then the contract is inactive.
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