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Tom-Next

Spot Forex positions are traded with a standard Value Date of 2 business days - the theoretical delivery date for the currency exchange if we were going to take delivery of a currency. For example, positions opened on Monday would have a Value Date of Wednesday.

As we are speculating on Forex and not actually taking delivery (settlement), positions are never allowed to reach their Value Date and are 'Rolled Over' to a new Value Date instead. So if the position we opened on Monday is still open on Tuesday, it will be closed then reopened again immediately at almost the same market price with the new Value Date of Thursday.

Sample of Tom-Next Rollover Report:

Financing Charge/Credit

When a position is rolled over to a new Value Date any profit or loss associated with that position is also rolled over to the new position but a small component of interest on the profit or loss is added or deducted from the opening price of the new position.

Swap Price

To summarize, Spot Forex positions held past the end of a trading day (4 PM CST) are rolled over to a new Value Date. At rollover, the position is closed and reopened with a small difference between the closing and the reopening price. This small difference is called the swap price and includes:

• The Rollover charges principally account for the interest rate differential between the two currencies traded
• The Financing credit/charge from any profit/loss on the position

Some typical swap rates are (Long position/Short position as of 11/08/04):

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Labels: forex