Before the Canadian Parliament established the Canadian Dollar in 1871, practically every province was conducting transactions in local currencies. Today, the Canadian Dollar value has floated ever since 1970, and is the seventh most traded currency in the world. Just as in the U.S., slang for a dollar is a “buck”, which dates back to the same term used to describe the value of a beaver pelt in the 17th century.
The two key factors affecting a currency’s value are central bank monetary policy and the trade balance. An easy monetary policy (low interest rates) is bearish for a currency because the central bank is aggressively pumping new currency reserves into the marketplace and because foreign investors are not attracted to the low interest rate returns available in the country. By contrast, a tight monetary policy (high interest rates) is bullish for a currency because of the tight supply of new currency reserves and attractive interest rate returns for foreign investors.
The other key factor driving currency values is the nation’s current account balance. A current account surplus is bullish for a currency due to the net inflow of the currency, while a current account deficit is bearish for a currency due to the net outflow of the currency. Currency values are also affected by economic growth and investment opportunities in the country. A country with a strong economy and lucrative investment opportunities will typically have a strong currency because global companies and investors want to buy into that country’s investment opportunities.
The Canadian Dollar futures contract provides a vehicle to assess the relative value of the U.S. Dollar compared to the Canadian Dollar, manage risks associated with currency rate fluctuations in the currency markets and to take advantage of profit opportunities stemming from changes in rates.
The futures contract trades on Globex, the CME Group’s electronic exchange. The market opens at 5:00 PM CT and closes the following day at 4:00 PM CT, Sunday through Friday. The market closes Friday afternoon and re-opens Sunday evening.
One futures contract is 100,000 Canadian Dollars. The most common contract symbol is 6C.
The previous settlement price (February 5, 2015) was .8033 or 80.33 cents compared to one U.S. Dollar. One price increment or “tick” is $.0001 per Canadian Dollar increments or $10.00. A price move from .8033 to .8034 is $10.00. Therefore, a price move of .8033 to .8133 is $1,000.
The performance bond or initial margin requirement to initiate one futures contract position is $1,705 (as of November 11, 2015). To control that futures position going forward, the maintenance margin becomes $1,550 (as of November 11, 2015).
The futures contract month listings are March (H), June (M), September (U), and December (Z).
The futures contract’s Last Trading Day (LTD) is the business day immediately preceding the third Wednesday of the contract month which is typically a Tuesday. The March 2015 Canadian Dollar contract LTD is March 17, 2015 for example.
If a contract is held through expiration, the settlement procedure is physical delivery in accordance with the CME Daily FX Settlement Procedures.
This particular market trades virtually around the clock (including while the European markets are trading from roughly 2:00 AM CT to 10:30 AM CT and Asian markets are trading from roughly 5:00 PM CT to 2:00 AM CT) and is susceptible to outside markets and fundamental influences.
Visit www.danielstrading.com for additional contract specifications and market information regarding the Canadian Dollar futures market.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
This material is conveyed as a solicitation for entering into a derivatives transaction.
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