for some reason my brain cannot comprehend when to go long or short futures
can someone explain in terms of commodities and foreign exchange?
thank you very much
for some reason my brain cannot comprehend when to go long or short futures
can someone explain in terms of commodities and foreign exchange?
thank you very much
i ll do foreign exchange for you cuz i am very very bad at commdities.
You are Canadian investor investing in US assets
your investment portfolio is therefore in US dollars.
right now US dollar has been depreiating, to hedge against further drag on your investment return by currency depretiation, you sell US forwards or futures.
Think about when you liquidate your US stocks, your proceeds are in USD. You will want to convert USD to Can$ right? so you will want to sell US$ to buy equivalent amount of Can$, right?
if you sell a currency, you are selling that currency’s forward or future.
conditions to buy forward or futures:
Say you will need to pay US$1000 to a US resort in 4 month for your vacation. that means you will need to come up with USD$1000 equivalent of Can$ in 4 months time. because of uncertain movement in the forex, you want to be certain about your budget in Can$ dollar. therefore you want to buy USD$1000 at a certain rate, so you will buy USD$ forwards and futures to lock in a favorable exchange rate.
Or this… Desire exposure to something = long
get rid of exposure = short
if you are purchasing foreign currency then purchase the forward
that is how i remember it
Thanks guys!