Contract Types
Managing Your Foreign Exchange Exposure
Hard earned profits and carefully planned budgets can be disrupted by fluctuations in the currency markets. Movements in the market between completing your transaction and needing to buy or sell your currency can mean the difference between making a profit or a loss.
The high risk and speculative strategy is to do nothing and ride the currency movements only buying the currency when it is needed. Alternatively you can let First Rate FX show you how you can minimise your risk by using one of our foreign exchange products listed below.
Spot Contract
This is the purchase or sale of a currency for delivery immediately. This type of contract will be most beneficial if you have an imminent requirement for currency and are happy with the current exchange rate.
Forward Contracts
The vast majority of overseas property purchases involve some kind of payment plan. These staged payments will inevitably mean that your purchase will be open to currency risk.
First Rate FX can help to take the gamble out of buying your new home by setting the sterling price that it will cost you now and letting you pay later when you need to make the individual stage payments. By purchasing a ‘Forward Contract’ you will be able to lock into a favourable exchange rate and protect yourself against currency fluctuations. You will only be required to pay a 10% deposit now and the 90% balance will be payable on maturity of the contract.
When the exchange rate moves during the time between you placing your order and the date of your payment (this can be up to 24months apart) these movements will not affect you at all, as you have locked-in to an agreed rate of exchange.
A forward contract could be the best solution for you if you wish to take the risk out of staged payments.
Stop Loss Orders
By talking to your currency specialist at First Rate FX you can arrange to place an order in the market to buy currency at a desired exchange rate. When this rate is achieved we will trigger the transaction for you. You can just sit back and relax - everything will be taken care of for you. We will monitor the markets on your behalf 24 hours 7 days a week and your contract will be fulfilled when the target is reached. You can cancel the order at any time if you change your mind.
Limit orders
Limit orders allow you to set a level of exchange rate at which, if achieved in the markets, you can buy or sell required currencies. Running a Stop Loss Order in parallel with a Limit Order means that you will effectively set upper and lower currency trading thresholds, making your currency transactions more predictable with rates guaranteed within a given range. As with the stop loss orders, First Rate FX will monitor the markets on your behalf 24 hours a day, 7 days a week.
Flexible Forward Contract
Also known as a ‘time option’, this type of contract is similar to a forward contract but allows you to make and receive the pre-agreed payments early if required. This type of contract is ideal if you know you need to purchase a foreign currency and wish to fix the exchange rate now but are unsure of the exact settlement date.
If you would like to take advantage of any of these products or would just like to know more, why not contact us today. A currency specialist will be on hand to answer any questions that you might have.