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Currency Futures Contract

Now the first thing to say about trading currency futures, is that there are many more currency futures contracts to choose from than in the options markets. So let’s have a look at the contract specifications for both regular and e-mini contracts. The most popular exchanges for currency futures trading are the CME and FINEX. The NYBOT FINEX division ( owned by ICE) provides a global marketplace for Euro based, U.S. dollar-paired and other strategic cross-rate contracts, as well as US Dollar Index (USDX) futures and options. As a general rule, most traders use FINEX for cross rates, and the CME for US dollar currency pairs.

I have taken these from the CME exchange but all the product specifications on the other exchanges will be very similar. At the last count there were over 24 currency pairs quoted against the US dollar, from the Brazilian Real to the Hungarian Forint. In addition ( unlike the currency options market), many of the exchanges also offer the cross pairs. Below is the contract specification for the Aussie dollar:

  • Australian Dollar Futures: CME
  • Trade Unit: 100,000Australian Dollars
  • Point Size: 1 point = $0.0001 per Australian dollar = $10 per contract
  • Contract Listing: Six months in the March quarterly cycle ( March ,June, Sept, Dec)
  • Product Code: AD
  • Ticker: AD
  • Globex: 6A
  • Trading Hours: Floor7.20 am – 2.00 pm
  • Minimum fluctuation: 0.0001 = $10
  • Trading Hours Globex: 5.00 pm to 4 pm daily

The Australian dollar was introduced in 1966, replacing the Australian pound. At that time, the value of Australia’s national currency was managed in accord with the Bretton Woods gold standard, but in practice the U.S. dollar was used as a value measure. Today the value of the Australian dollar is managed with almost exclusive reference to domestic measures of value, such as the Consumer Price Index. Futures contracts are quoted in U.S. dollars per Australian dollar, and call for physical delivery at expiration. Physical delivery takes place on the third Wednesday of the contract month, in the country of issuance at a bank designated by the CME Clearing House (courtesy of CME). Now remember, as I have stressed many times on the futures trading web site, these are physical delivery contracts which in this case will be cash settled ( so not quite as bad as 40,000 lbs of live cattle) ! – so please manage your trades with care. OK, let’s look at the latest additions to the currency futures product range – e-minis.

  • E-mini Euro  Trade
  • Unit: 62,500 euros
  • Point Size: 1 point = $0.0001 per Euro = $6.25 per contract
  • Contract Listing: Two months in the March quarterly cycle, (March, June Sept, Dec)
  • Product Code: E7
  • Ticker: E7
  • Trading Hours: Globex5.00 pm to 4.00 pm ( no floor trading)
  • Minimum fluctuation: 0.0001 = $6.25

The CME E-mini Euro FX contract is based on the Euro, the European currency traded by the world’s largest governments, banks and currency traders. CME E-mini Euro FX futures began trading on CME Globex in 1999 and offer the retail trader a ‘cut down’ version of the standard contracts. As you can see the e-mini is only traded electronically on the Globex platform, and not on the floor of the exchange. Now in broad terms as you can see, a standard futures contract is approximately the same in value as one standard lot size in the spot forex market, whilst the e-mini is roughly half, or 5 -6 mini lots, which is still too high for many traders. OK – let’s take a look at how currency futures trading contracts are priced in the markets, and we calculate profit and loss in our trades – then we’ll look at a simple low risk strategy to get us started.