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Terra Nova Currency Futures:
No longer are the world's currency markets the exclusive domain of the largest banks and multinational corporations. Through Terra Nova Futures, traders and investors can trade currency contracts and have access to the world of
foreign exchange.

Currency Futures Offerings

Terra Nova Futures presently offers trading within the following currencies:

TAL Symbol Currency Contract Size Tick Value Tick Increment
/6A Australian Dollar 100,000A$ $10 .0001
/6B British Pounds 62,500BP $6.25 .0001
/6C Canadian Dollar 100,000C$ $10 .0001
/6E Euro FX 125,000euro $12.5 .0001
/6J Japanese Yen 12,500,000Y $12.5 .0001
/6S Swiss Franc 125,000SF $12.5 .0001
/6M Mexican Peso 500,000 Mex. pesos $12.50 .000025

 

Hours of Currency Futures Trading
Terra Nova Futures will allow trading in these products from 5:00pm to 4:00pm CST the next day (Sunday- Thursday).
Daily trading ends at 4:00pm CST and reopens at 5:00pm CST. Trades made after 5:00pm are dated as of the next day.

What is a Currency Futures Contract?
Currency futures are standardized financial contracts traded on exchanges and through electronic networks like the Chicago Mercantile Exchange (CME) and their GLOBEX® system. Currency futures are quoted in dollars per unit of foreign currency at the Chicago Mercantile Exchange. To determine the dollar value of a futures contract, simply multiply the contract size by the current price.

For an example, the Swiss Franc Futures contract traded at the CME represents 125,000 Swiss Franc. At the price of $0.6010 USD/SF the Value of the contract would be $75,125 USD ($0.6010 x 125,000).

Now suppose that the price of the Swiss Franc currency future moved to $0.6020, the holder of the contract has profited from the increase in the value of the contract from $75,125.00 USD to $75,250.00 or $125.00.

Another way to calculate the same change in value would be to multiply the change in price (in ticks) by the value of a single tick. The value of a tick is set by the exchange and represents the minimum price fluctuation for a particular contract. The minimum fluctuation (tick) of the Swiss Franc contract is .0001 and the value of that tick is $12.50. In our example the price moved from .6010 to .6020 or 10 ticks or $125.00 (10 x 12.50)

Margin
Due to the fact that these are highly leveraged instruments, a thorough understanding of margin is a crucial concept when trading currency futures. During each trading day, a currency futures trading account is marked-to-the–market for any losses or gains. These losses or gains are then immediately debited or credited from/to the account.

For instance, a Terra Nova customer with a $12,000 account balance purchases 6 September Swiss Franc contracts at an opening price of $.7004 USDSF. The total dollar value of the contracts are: (one Swiss Franc contract contains 125,000 Swiss Francs) $.7004 X 125,000 X 6 = $525,300. The current initial margin for the position is $10,938 ($1,823 margin for one contract X 6 contracts = $10,938). Since the account balance is $12,000, the initial margin requirement has been met with the cash in the account. Please note that Terra Nova Futures enforces minimum exchange margin requirements for all overnight positions. These requirements are subject to change at any time without notification. Please consult the exchange website for up-to-date margin information.

In the second day of trading, the settlement price declines to $0.6975. The price of one contract has dropped 0.0029 or 29 ticks, resulting in a loss of $362.50 per contract and $2,175 on six contracts. The value of the contracts is now $523,125. (0.6975 X 125,000 x 6 = $523, 125) The total value of the 6 contracts has declined from $525,300 to $523,125 or a loss in value of $2,175. This amount is deducted from the account as profits and losses are continually marked to the market throughout each trading day. The total account balance is then $12,000 - $2,175 or $9825. The current maintenance margin on one September Swiss Franc contract is $1,350. The maintenance margin on the six-contract position is therefore $8,100 ($1,350 X 6 = $8,100). As the account balance is above the maintenance margin of $8,100, no action is required on this account.

Suppose now that the settlement price at the end of the following trading day is $.7009 (an increase in the settlement price). The price of the contract has increased by 0.0034 (34 ticks per contract) resulting in a gain of $425 per contract (12.50 x 34) or $2,550 for the six-contract position ) ($425 X 6). The value of the contracts is now $525,675 (0.7009 X 125,000 X 6). The value of the account has increased by $2,550 to $12,375 ($9,825 + $2,550 ). As the account balance is above the maintenance margin of $8,100, no action is required on this account.

Instead of the gain noted in the previous paragraph, suppose the next day there was a drop in the settlement price to $0.6850 from $0.6975. The price of the Swiss Franc contract decreased 0.0125 (125 ticks) resulting in a loss of $1,562.50 per contract ($12.50 X 125) and $9,375 ($12.50 X 125 X 6) on six contracts. The value of the contract is now $85,625 ($0.6850 X 125,000) and the value of the six-contract position is $513,750 ($0.6850 X 125,000 X 6). The value of the account has decreased to $450. Since the account value is lower than the current maintenance margin of $1,350 for each contract, the customer will be required to bring in at least $10,488 to meet the initial margin requirement to continue holding the full six-contract September Swiss Franc position ((1,823 X 6) – 450)

To view the most current margin rates for currencies, please click here. Unless you currently hold the underlying commodity, be sure to look at the ‘spec’ (or speculator) performance bond figure.


Expiration and Delivery of Currency Futures Contracts
Since currency futures contracts are delivered in the respective foreign country’s currency upon expiration, Terra Nova Futures does not allow a currency futures contract to be held to the expiration date. To prevent a currency futures contract from expiring within a customers’ account, Terra Nova Futures requires that customers either liquidate or roll their position to a contract with a later expiration date. Initial margin will be raised to 100% roughly one week prior to expiration.

For more information on the expiration dates for the current contract, please click here.


Roll Dates
Roll Dates are days when traders switch their focus from a contract that is due to expire to the next available contract month. The new contract then becomes the ‘lead’ or most actively traded contract. After this date the liquidity in the contract that is due to expire may drop off quite dramatically. For this reason, anyone wishing to initiate a new position should do so in the new contract month. People with existing positions in the expiring contract month should have already rolled their position into the new lead contract or prepare to liquidate their position. For example, if you are long a March 2003 Swiss Franc contract, on March 10, 2003 you should have sold that contract and have bought a June 2003 contract to “roll” your position to the next contract month (June 2003) or plan to sell your remaining March contact and exit that position.

To view the roll dates on the CME website, please click here

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Terra Nova Futures is a division of Terra Nova Trading, L.L.C.®
All securities and futures offered by Terra Nova Trading, L.L.C. member NASD, NFA, SIPC, PCX & ISE.
Copyright© 2004 Terra Nova Trading, L.L.C. All rights reserved.

MarketWise Trading School and Terra Nova Trading, L.L.C. share common ownership.

RealTick® graphics used with permission of Townsend Analytics, Ltd.© 1986-2004 Townsend Analytics, Ltd. All rights reserved.
RealTick is a registered trademark of Townsend Analytics, Ltd.

Please Note: "The risk of loss in electronic active investing can be substantial. You should, THEREFORE, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources."

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