I’m in an international finance class and I need to write a paper about the yen and whether I would recommend purchasing futures or options in the yen. I’ve read all the chapters in the text and looked up articles and I still don’t get it. If the exchange rates are changing and the dollar is worth less than the yen in a month than it is now, how can you profit? Should you buy or sell futures if I think the yen will appreciate? I need someone to ELI5.
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An example:
You make a contract allowing you to buy yen in the future at a fixed rate.
If the yen gains in value against the dollar (exceeds the rate you bought at), you will have net gains in dollar after exchanging the yen bought on the spot market.
Naturally, profitability depends on option/future pricing, since it make little sense if you pay an exorbitant sum for the contracts
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