A Smarter Way To Convert Money
Merchant Advance has partnered with Agility Forex to provide our customers with access to foreign exchange services. Because of our partnership, we have access to inter-bank rates and proprietary technology that allows us to bypass the banks & deliver the best pricing for foreign exchange direct to your screen in an instant.
The platform provides real time pricing with the best rates, with transactions being completed in seconds. Simply add and choose one or multiple beneficiaries, how much you are sending and what currency you are paying in. Simple.
If you know you have a currency requirement sometime in the future and are concerned about what the currency rate might do between now and then, you can lock in a rate today for that future requirement. Forwards allow you to take the risk out of future market movements by agreeing the rate you transact at today. For example, you may be an importer of goods from the US but not be required to pay for them for 6 months. Rather than accept the Spot rate in 6 months, which could easily have moved and taken your profit with it, you can agree to a forward price today and so know exactly what your costs will be. The forward price is easily calculated and is just a function of the interest rates of the two currencies concerned. Agility Forex offer forward rates out to 12 months. Forwards require a Payment Reserve deposit of between 5 and 10% of the total contract value.
Options are another way to manage your future currency risk. Buying an option gives you the right to exchange currency at a fixed rate on a future date. You are not obligated to transact at this rate so if the actual rate in the market on the future date is better than your option rate (the strike price) you can ignore the option and transact at the then current spot rate. Options can be a good way to manage your downside risk so you know what your worst case scenario is whilst allowing you to benefit from a currency move in your favour. The upfront price of the option is known as the Premium, and this is a function of strike price, time remaining and underlying volatility. You should take into account the Premium as well as the strike price when looking at the effectiveness of an option as a means of managing your risk. The Premium is not part of the future cash flows. =