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Currency Future Trading Through Shareway Securities Limited

By Expert Author: Sachin kumar

Although, Foreign Exchange (FOREX) is the world’s largest financial market, it’s relatively unfamiliar terrain for many investors. FOREX was primarily the domain of large financial institutions and MNCs but time has changed and now individual investors are also interested in currency trade. MCX-SX exchange launched its currency future trading platform on 7th Oct, 2008 with a trading cycle of 12 months.

Currency exchange rates are the rate at which one currency can be exchanged for another. Exchanged rates fluctuate based on many economy factors. Currently Indian rupee is allowed to trade against four currencies, USD, euro, pound sterling, and the Japanese yen.

Currency futures contract is a standardized exchanges credit contract to buy or sell a specified amount of particular currency at a certain date in the future at a specified price. It allows investors to hedge against foreign change risks.

For Example:

Suppose a wheat importer wants to import wheat worth USD 10,000 and places his import order on Aug 5, 2013, with the delivery date being 3 months ahead. At the time when the contract is placed, in the spot market, one USD was worth say INR 60.00. But, suppose the Indian Rupee depreciates to INR 62.00 per USD when the payment is due in November 2013, the value of the payment for the importer goes up to INR 620,000 rather than INR 600,000. So to avoid this loss of money due to fluctuations in foreign exchange market, importer should enter into future contract based on hedging strategy.

Therefore, the net payment in INR for the hedged transaction would be INR 600,000 rather than INR 620,000. Had he not participated in futures market, he would have to pay INR 620,000. Thus, he kept his purchases unexposed to foreign exchange rate risk.

Shareway Securities Limited offers trading facilities to investors on the currency derivative segment of the MCX Stock Exchange Ltd. To know more about the latest updates of currency trading log on to www.shareway.in and get the answers to all your queries about the FOREX market and make the maximum profit with the assistance of the Shareway expert research team.

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