Figuring P&L in Commodities: It All Makes Cents

 

Currency Futures


Currency futures are listed on the Chicago Mercantile Exchange and are, for the most part, traded in "American terms". This simply

currency futures

 means that the currency prices listed in the futures market represent the dollar price of each foreign currency. In order to understand the point of view of the futures price ask yourself; "How much of our currency does it take to buy one theirs?"


If the Euro is trading at 1.1639, it takes $1.16 39/100 U.S. greenbacks to purchase one Euro. The value of one futures contract is 125,000 Euro so each tick higher or lower changes the price of the contract by $12.50 and translates into a profit or loss to the trader in that amount. Like the Euro futures contract, the majority of currency futures have a tick value of $12.50; others that share this characteristic are the Swiss Franc, and the Japanese Yen futures contract. The Australian Dollar and the Canadian Dollar both have a tick value of $10 and the British Pound fluctuates in ticks of $6.25. Once you know the tick value of each of these contracts, it is easy to compute the dollar amount of risk, profit and loss. For example, a trader that is long the Euro from 1.1239 and liquidates the position at 1.1432 would be profitable by 193 ticks or $2,412.50 (193 x $12.50).

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