Identifier: C5T6L4 · Revision: 2026-10-26 · Classification: domestic

Decision and objectives

The practical task is to compare forward, futures and call protection for one currency payable. Make the decision reproducible: name the exposure, time horizon, cash requirement and comparison baseline before selecting a product.

Objectives: Compare forward, futures and call protection for one currency payable; Reconcile terminal effective cost with peak cash needed before receipts; Select a domestic route or reject it using explicit access and cash facts.

Prerequisite: C5T6L3; completed Classes 1–4 and the Stock Market School foundation or Forex School foundation. Every example is hypothetical. Prices, dates, rates, fees, contract factors, policies and tax schedules are supplied teaching inputs, not current offers or legal parameters. No live account is needed.

Mechanics

An importer needs actual foreign currency by an invoice deadline. A deliverable forward can exchange its principal on that date; a cash-settled future or call only pays a difference, so a separate spot purchase remains. An option preserves benefit from a favorable currency move in exchange for premium. A forward locks an obligation and can have credit, collateral and termination costs even with no initial premium.

This integrated domestic case assumes all stated provider/series access is verified in the fictional packet. It does not imply every learner can access a bank forward, a currency option or any listed maturity. Read customer terms and the current domestic authority before applying the arithmetic.

Price and return drivers

Effective invoice cost = actual spot purchase − hedge receipts + hedge debits + all costs. Peak cash need may additionally include margin still pledged when the invoice is due, or a hedge receipt arriving after the invoice. Treat those temporary restrictions separately from final economic cost. A bounded expiry cost is not enough if payments and receipts occur in the wrong order.

Worked case

Hypothetical USD 50,000 invoice due day 90; total accessible lira budget TRY 2,300,000 and at least TRY 1,800,000 must remain available for operations until day 60. Forward offer delivers USD 50,000 at 43, fee TRY 10,000, and written approved credit terms require no initial or interim collateral in this case: principal TRY 2,150,000 and total TRY 2,160,000, leaving TRY 140,000. Futures candidate:50 cash-settled contracts of assumed USD 1,000 at 42.80, execution TRY 5,000 plus funding TRY 15,000. If final reference50 and actual spot 50.10, invoice TRY 2,505,000 minus gain TRY 360,000 plus costs TRY 20,000 gives TRY 2,165,000. The0.10 conversion basis costs TRY 5,000. Initial margin TRY 300,000 leaves TRY 2,000,000 before charges, satisfying only the initial operating constraint.

Adverse case

For a European cash-settled longUSD call, quantity USD 50,000, strike 43, premium 1.20TRY/USD and fees TRY 5,000, upfront cost TRY 65,000. At matched invoice/fixing spot 38,43,50, final effective costs are TRY 1,965,000,TRY 2,215,000,TRY 2,215,000 before extra conversion/funding. These are expiry results; pre-expiry option value also depends on time and volatility. But suppose the call cash arrives one day after the invoice: at spot 50 the firm must first pay TRY 2,500,000 plus already paid TRY 65,000, requiring TRY 2,565,000, or TRY 265,000 beyond its budget until the TRY 350,000 call receipt arrives. Under a separate futures low-FX stress, final reference38, actual spot 38.10, cumulative long-futures loss TRY 240,000 and margin still pledged TRY 400,000 at invoice time create peak commitment1,905,000+240,000+400,000+20,000=TRY 2,565,000, again TRY 265,000 short before collateral release. A spot purchase now at 40 plus TRY 5,000 costs TRY 2,005,000 and leaves only TRY 295,000, violating the operating-cash condition until day 60.

Practical use

Verify deliverable instructions, invoice calendar, fixing/payment dates, provider credit conditions, actual option exercise/settlement and member margin before choosing. The forward's no-collateral term is a supplied contract fact, not a universal rule. Include FX spread, service/credit fees, collateral funding, early termination and investor-specific tax; interest on unused operating cash is excluded equally because no rate is supplied.

Use permitted domestic access routes and the actual instrument documents. Verify intermediary authority, investor eligibility, order/redemption terms, settlement, custody and executable size before implementation. Reconcile spread and commissions, funding, collateral, custody, product expenses, conversion and exit charges; an amount already embedded in a fill or fund unit price is not deducted again. A published mark or product description does not promise an executable price or liquidity.

Tax is excluded unless a numerical schedule is expressly supplied as hypothetical. For actual rules record income year, residence and individual/corporate status, instrument and acquisition/contract dates, taxable event and rule effective date. The GIB investment-income guide, checked 2026-10-26, covers 2025 individual income; its 2026 publication date alone cannot settle a 2026 liability.

Decision boundaries

The supplied forward meets both invoice and operating-cash constraints, subject to provider performance and unchanged invoice facts. The option and futures have attractive terminal economics but fail the stipulated cash timing without a committed bridge. Do not choose them solely from a final payoff table. If the forward terms cannot be verified, defer or redesign the operational cash plan rather than route through an unverified foreign platform.

Practice and references

Exercise: hypothetical USD 20,000 payable, European cash-settled call strike 30, premium 0.80TRY/USD and fees TRY 2,000. A matching deliverable forward is supplied at TRY 30.50/USD with a TRY 1,000 fee. Compare effective costs at spot 28, 30 and 36 with that forward. With synchronized receipt/payment, Solution: at spot 28,30,36 effective costs are TRY 578,000,TRY 618,000,TRY 618,000. A deliverable forward at 30.50 plus TRY 1,000 fee costs TRY 611,000. The call benefits from lower spot and costs more in high states; delayed call settlement would need a separate bridge regardless of its expiry cap.

Takeaway: Select a domestic route or reject it using explicit access and cash facts with the cash dates, costs and remaining risks stated.

Product card: portfolio-decision-record. Formula: Currency protection economic and cash test. Glossary: Payment-timing gap, Terminal effective cost. Next lesson: C6T1L1. Topic test.

Sources checked 2026-10-26:

Additional product cards: currency-cash, fx-forward, currency-call-hedge.

Shared reference guide | Class examination