FX Position Management

Quoting FX Futures

All CME® dollar-based FX futures prices are quoted in direct terms against the U.S. dollar. The price, simply put, is the number of U.S. dollars it would take to buy one unit of foreign currency. Looking at the June Japanese yen trading at .008563 (or .8 U.S. cents), the value of one U.S. dollar is one divided by .008563, which is 116.78 Japanese yen. The standard pricing of CME FX futures enables traders to focus on the direction of the market.

In the OTC market, some currencies are quoted in indirect terms, or the amount of foreign currency that equals one U.S. dollar. The indirect OTC quoting methodology presents prices in units of the foreign currency against one unit of U.S. dollar for all currencies excluding the euro, the British pound, the Australian dollar and the New Zealand dollar, which are inverted.

In the FX futures market, the minimum fluctuation on a currency contract is called a tick. The value of a tick is calculated by multiplying the minimum tick size by the size of the contract. For example, looking at the Euro FX futures contract, the minimum tick size is $0.0001. The size of the contract is 125,000 euros, which means the value of a one-tick movement in Euro FX futures is $12.50.

For example, let’s take a look at the Japanese yen futures contract. If a trader initiated a long position, buying one June Japanese yen futures contract at 0.008275 and then later selling one June Japanese yen contract after a rally to 0.008300, the profit (before commissions) would be $312.50 (25 ticks x $12.50). Again, the $12.50 value of a one-tick movement in the Japanese yen futures contract is calculated by multiplying the minimum tick size (0.000001) by the value of the contract, which in this case is 12,500,000 JY.

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