Question

The forward price on the Swiss franc for delivery in 45 days is quoted as 1.1000. The futures price for a contract that will be delivered in 45 days is 0.9000. Explain these two quotes. Which is more favorable for a trader wanting to sell Swiss francs?

Answer 1

1) The forward price on the Swiss franc for delivery in 45 days is quoted as 1.1000.

here, The 1.1000 forward quote is the number of Swiss francs per dollar.

2) The futures price for a contract that will be delivered in 45 days is 0.9000.

But here, The 0.9000 futures quote is the number of dollars per Swiss franc.

so, if we quote forward price in the same way of futures price then,

=1/1.1000

=0.9091

Therefore swiss francs is more valuable in the forward market than futures market. Therefore the forward market is more favorable for a trader wanting to sell Swiss francs.