Currency futures contracts (commonly called just futures) are sold on the Chicago Mercantile Exchange (CME). “…Currency futures, which are contracts for specific quantities of given currencies; the exchange rate is fixed at the time the contract is entered into, and the delivery date is set by the board of directors of the International Monetary Market (IMM)” The main use of such a device is to hedge against currency risk. Forward contracts are similar to future contracts, but there are some major differences. Futures contracts are sold on an exchange which means it can change hands any number of times (and indeed the exchange is set up for this to happen). A forward contract is between a bank and a customer. It is harder for resell the forward contract than a futures contract. This fact opens up a new door in currency futures; that of speculative buying of futures contracts. Investors can use currency options as an investment tool. Therefore, futures contracts are not only for hedging. “To calculate the profit or loss on a trade, you would multiply the change in price (in ticks) by the value of a single tick. The value of a tick is set by the exchange and represents the minimum price fluctuation for a particular contract. The minimum fluctuation (tick) of the Swiss Franc contract is .0001 and the value of that tick is $12.50. For example, if the price moved from .8150 to .8160 or 10 ticks the resulting gain would be $125.00 (10 x 12.50).” In this instance the person long on the Swiss Franc would make $125 for that 10 tick move. This shows how the future contract could be used as a hedging tool and an investment tool. This investor has the opportunity to liquidate his $125 before the maturity of the contract. This is the main reason that futures can be used an investment tool.   SOURCES Sarin, Atulya and Shapiro, Alan C. Foundations of Multinational Financial Management, 6th Edition. 2009 John Wiley and Son, Inc. http://www.mastertrader.com/futures/pop_cme_currency.htm