Tactical forwards - import

Australian Importers - Example: Participating Forward (Importer)

Current Market Parameters

Proposed Participating Forward

Spot:

.5175

Contract Rate (guaranteed rate):

.5135

Swap:

-.0016

Term:

3 months

Trigger Rate:

.5300

Outright:

.5159

The possible outcomes at the expiration of the contract are:

  • Trigger at .5300 untouched during the term of the contract:
    Sell AUD at either the prevailing Spot Rate or the Contract Rate, depending on which is more favourable.
  • Trigger at .5300 touched during the life of the contract:
    Sell AUD at the Contract Rate.

The Participating Forward has provided guaranteed cover, while at the same time giving you the opportunity to benefit from an appreciating AUD up to and including .5299.

 

Example: Reward Forward (Importer)

Current Market Parameters

Proposed Reward Forward

Spot:

.5175

Contract Rate (guaranteed rate):

.5135

Swap:

-.0016

Term:

3 months

Trigger Rate:

.4900

Outright:

.5159

The possible outcomes at the expiration of the contract are:

  • Trigger at .4900 touched during the term of the contract:
    Sell AUD at either the prevailing Spot Rate or the Contract Rate, depending on which is more favourable.
  • Trigger at .4900 untouched during the life of the contract:
    Sell AUD at the Contract Rate.

The Reward Forward has provided guaranteed cover. And if the Trigger Rate of .4900 has traded during the life of the contract, you have the opportunity to benefit from an appreciating AUD.

Example: Cylinder Forward (Importer)

Current Market Parameters

Proposed Reset Forward

Spot:

.5175

Floor Rate (worst case):

.5030

Swap:

-.0016

Term:

3 months

Ceiling Rate (best case):

.5240

Outright:

.5159

The possible outcomes at the expiration of the contract are:

  • AUD/USD trading above .5240
    Sell AUD at the Ceiling Rate of .5240
  • AUD/USD trading below .5030
    Sell AUD at the Floor Rate of .5030
  • AUD/USD trading between .5240 and .5030
    Sell AUD at the prevailing Spot Rate

The Cylinder Forward has provided guaranteed cover, while at the same time giving you the opportunity to benefit from the AUD appreciating up to .5240.

Example: Reset Forward (Importer)

Current Market Parameters

Proposed Cylinder Forward

Spot:

.5175

Original Contract Rate:

.5120

Swap:

-.0016

Term:

3 months

Reset Contract Rate:

.5160

Outright:

.5159

Trigger Rate:

.5375

The possible outcomes at the expiration of the contract are:

  • Trigger at .5375 untouched during the term of the contract:
    Sell AUD at either the prevailing Spot Rate or the Original Contract Rate, depending on which is more favourable.
  • Trigger at .5375 touched during the life of the contract:
    Sell AUD at the Reset Contract Rate.

The Reset Forward has provided guaranteed cover, while at the same time giving you the opportunity to benefit from an appreciating AUD up to and including .5374.

Need more information?

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