currency futures vs forex

Discussion in 'Financial Futures' started by wfctrader, Oct 21, 2008.

  1. wfctrader


    Been a Forex trader for while and am quite new to futures. Got a simple question here: in which way exactly do the currency quotes relate to forex currency quotes?

    Namely, when long in a currency pair on forex there's some money in the resulting interest. What would happen if went long in say EURUSD on forex and long in USD.EUR futures (EURUSD inverted) at the same time on the same account? Wouldn't that be a 100% hedge with some significant interest (dependent on the leverage, of course)?

    Please excuse my ignorance if I got something completely wrong about futures.
  2. tetuan01


    All quotes are in dollars per 1 unit of currency. So, you have to convert the spot quotes but EUR, GBP, NZD and AUD.

    The differential interest rate to December is in the price. In those currencies that have a carry rate lower than the dollar, the future quote is higher than the spot quote. In those currencies that have a carry rate higher than the dollar, the future quote is lower than the spot quote.

    If you want to play the carry trade GBP/JPY, you have to buy BP and sell JY. Take care of the size; the BP contract is half of the JY one
  3. wfctrader