Contract speculations
Standardized futures contracts contain numerous features that are defined by the exchange.The standardized features of foreign currency futures cover 1)trading unit or size of contract, 2)method of price quotation, 3)minimum price change, 4)price limits, 5)maturities, 6)specified final trading date, 7)settlement date, and, 8)collateral or margin requirements.
The following summary defines several aspects of futures contract specifications on the CME.
● Trading unit
On the IMM, Swiss franc and German mark contracts are for 125,000 units.French franc contracts are larger (250,000 units), while British pound contracts are smaller (62,500 units).
● Method of quotation
All currency contracts traded on the IMM are quoted in US dollars.
● Maturities
IMM contracts have a standard maturity date.Currency futures contracts mature on the third Wednesday of the month in which the contract expires.
● Specified final trading date
IMM contracts may be traded until two business days before the Wednesday on which they mature.Generally these contracts trade until the Monday preceding the Wednesday maturity date.
● Settlement date
This date is the third Wednesday of the delivery month.We emphasize that only a small proportion of futures contracts are settled by physical delivery of currency between buyer and seller.Most often buyers and sellers offset their original position prior to the delivery date by taking an opposite position.