Posted by forex at 1:28 AM
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1. Imagine you are the treasurer of a multinational company who must manage various currencies from your firm's daily exchange of goods and services. Helping you in this endeavor will be professional FOREX traders that specialize in specific currencies as well as traders who specialize in hedging strategies.
2. Call your bank trader when you want advice about overnight currency balances. Traders constantly keep up with economic developments and also practice fundamental analysis (on basic financial information) or technical analysis (on future prices based on past market data), so are in a good position to advise you whether you should sell or hold the currencies in question.
3. Call your bank trader when you have to transfer money in a foreign currency to pay for goods or services. Ask for advice on current and future exchange rates and transact the deal accordingly.
4. Call your bank trader when you have a future income stream in a foreign currency and you want to hedge your income stream and safeguard your profits by using a FOREX future. This is an exchange-traded contract that requires delivery of a currency at a specified price, on a specified future date. The holder of a future has the obligation to buy or sell the currency but has to deposit a certain percentage (dependent on the contract) of the contract value as an amount of margin. Transact the deal according to your bank trader's advice.
5. Call your bank trader when you have a future obligation in a currency and you want to safeguard the price you will pay by locking in the future rate by using a FOREX forward. With FOREX forwards, the contract holders are obligated to buy or sell a currency at a specified price, at a specified quantity and on a specified future date. These contracts cannot be transferred as with FOREX futures. Authorise the trader to transact the deal as advised.
6. Call your bank trader when you have a problem with a maturing forward and the delivery of the goods you were supposed to pay for is delayed. In this case, you need to enter into a FOREX swap deal so that you are not exposed in the currency you will use to pay for the goods. A FOREX swap is a purchase or sale of a currency at spot together with a simultaneous opposite purchase or sale of a currency at a specified future date, rate, and quantity. Transact the deal as the trader advises.
7. Call your bank trader when you want advice on using FOREX currency options for hedging future obligations. A FOREX or currency option gives the option holder the right but not the obligation to buy (call) or sell (put) a currency in a given quantity at a given date and price in the future. The trader will advise you on the best options strategies to use.