1
$\begingroup$

For an US investor, buying an European index futures contract doesn't generate EURUSD exposure to the portfolio, since this trade is equivalent to borrowing EUR and buying the underlying.

Can I follow that same reasoning for commodity futures priced in EUR, for example carbon trading? Does trading it entail any FX exposure?

Improve this question
$\endgroup$
3
  • 1
    $\begingroup$ I am not familiar with carbon trading. But as long as you hold the commodity future in a US futures account (collateralized wih USD assets) it would seem that opening the position does not create any EUR exposure. (But note that as the trade unfolds, the P&L will create a positive or negative EUR position in the account and thus a (small) exposure. Only on the P&L to date, not on the notional. From time to time you can convert those EUR to USD to minimize this). $\endgroup$
    – nbbo2
    Nov 18, 2022 at 14:09
  • $\begingroup$ So the only way you can get FX exposure on the notional by trading futures is trading currency futures, I guess? $\endgroup$
    – SuavestArt
    Nov 18, 2022 at 14:13
  • 1
    $\begingroup$ I guess that's what those fx futures are for, right ? :) $\endgroup$
    – nbbo2
    Nov 18, 2022 at 14:16

1 Answer 1

Reset to default
1
$\begingroup$

Very interesting

Yes id say same logic applies to a euro commodity futures.

the futures is like a series of 1 day forward contracts, so any day, your fx exposure is only on that days euro gains/losses

Improve this answer
$\endgroup$

Not the answer you're looking for? Browse other questions tagged or ask your own question.