Unpredictable fluctuations in the dollar could seriously damage the life of a private investor.
If a potential investor who has $ 10,000, frightened by a collapse of the U.S. currency, in May of this year, would sell dollars and the amount received to put in the bank for deposit, to date, even with the interest income, he/she was able to buy only about $ 9 000. Make a fluctuation of exchange rates – a task for professionals. Ordinary investors have another problem: how to keep their savings during sharp fluctuations in exchange rates.
To insure against currency losses investors can use futures on the currency pair, such as the euro / dollar or dollar / euro. Futures contract – an agreement to buy or sell currencies, delayed in time, but on a pre-fixed rate.
For example, if today’s investor bought futures on the euro / dollar rate of execution in December, then, in December, he/she will be able to buy dollars at the price agreed at the time of purchase futures.
For example, in December 2017, the investor will need to buy a $ 7,000 to fly with them on holiday in Bali. The money for the purchase of foreign currency will be only in December and will be paid in euro.
During this time, the dollar could rise sharply and the purchase of the required amount of currency is not enough money. Insure vs. ensure you need to buy 7 futures contracts on the euro / U.S. dollar (ticker – SiZ1 in the derivatives market of RTS Forts) with performance in December.
In a similar way you can protect yourself from the sharp depreciation of the euro because of the debt crisis in Europe. This requires access to the market Forex, which can provide any broker.
Futures trading has significant advantages: first, the difference in the rate of purchase / sale (i.e., the spread between the purchase price and the sale price currency) In addition, to buy or sell futures you need significantly less money than the purchase or sale of currency, – warranty support. Insure vs. ensure, decision is yours.