What are currency (or FX) futures?
Currency futures, also known as foreign exchange (FX) futures, are standardized contracts for the purchase and sale of currencies for future delivery at predetermined exchange rates.
Understanding Currency Pairs
Base Currency: First currency in the pair (what you're buying/selling) Terms Currency: Second currency in the pair (what you're paying with).
Example: EUR/USD at 1.1250
- Buying 1 euro costs 1.1250 U.S. dollars
- Base currency: EUR
- Terms currency: USD
Pricing and Basis Relationships
FX Futures Pricing Formula
Futures prices are based on:
- Spot exchange rate
- Interest rate differential between currencies
- Time to expiration
Formula: Futures Price = Spot Rate × (1 + Terms Rate × Days) ÷ (1 + Base Rate × Days)
Basis Calculation
Basis = Futures Price - Spot Price
Positive Carry: When base currency interest rate > terms currency rate
- Futures trade at discount to spot
- Example: Higher USD rates vs. EUR rates
Negative Carry: When terms currency rate > base currency rate
- Futures trade at premium to spot
- Cost of holding position reflected in futures price
Convergence at Expiration
- Futures prices tend to converge to spot prices at expiration
- Time decay reduces basis as expiration approaches
Most Actively Traded Contracts
Euro/USD Futures (6E)
- Contract size: €125,000
- Quoted in U.S. dollars per euro
- tick size: $6.25
E-mini Euro FX Futures (E7)
- Contract size: €62,500
- Quoted in U.S. dollars per euro
- tick size: $3.125
Micro Euro FX Futures (M6E)
- Contract size: €12,500
- Quoted in U.S. dollars per euro
- tick size: $1.25
British Pound/USD Futures (6B)
- Contract size: £62,500
- Quoted in U.S. dollars per British pound
- tick size: $6.25
Micro British Pound/USD Futures (M6B)
- Contract size: £6250
- Quoted in U.S. dollars per British pound
- tick size: $.625
Japanese Yen/USD Futures (6J)
- Contract size: ¥12,500,000
- Quoted in U.S. dollars per yen
- tick size: $6.25
E-mini Japanese Yen/USD Futures (J7)
- Contract size: ¥6,250,000
- Quoted in U.S. dollars per yen
- tick size: $6.25
Micro Japanese Yen/USD Futures (MJY)
- Contract size: ¥1,250,000
- Quoted in U.S. dollars per yen
- tick size: $1.25
Canadian Dollar/USD Futures (6C)
- Contract size: CAD $100,000
- Quoted in USD per CAD
- tick size: $10.00
Micro Canadian Dollar/USD Futures (MCD)
- Contract size: CAD $10,000
- Quoted in USD per CAD
- tick size: $1.00
Australian Dollar/USD Futures (6A)
- Contract size: AUD $100,000
- quoted in USD per AUD
- tick size: $10.00
Micro Australian Dollar/USD Futures (6A)
- Contract size: AUD $10,000
- quoted in USD per AUD
- tick size: $1.00