Currency Futures Trading Basics

This chapter describes the fundamental features of currency futures or foreign exchange (FOREX) futures trading. Currency futures are spot prices adjusted by the forwards to arrive at a future delivery price. Professional arbitrageurs job the two markets to keep them in line. The most active currency futures trading contracts trade for four fixed dates in the year. They settle on the third Wednesday of March, June, September, and December. FOREX futures trading markets allow traders to buy and sell contracts and thus avoid the need for the cash settlement of trades. Such is always available at the quarterly settlement of maturing contracts, allowing professional arbitrageurs to keep the two markets tightly in line with one another.