So, you’ve contacted a specialist currency broker to get a better exchange rate, it’s a great start! It’s worth noting that there are a number of options to allow you to take advantage of favourable exchange rates or limit the risk of market fluctuations. Read on for an explanation of our contract options.
A Spot Contract is perfect for when you need to make an international payment with very little notice or if you have access to your funds and want to convert all or part of them straight away. Your dedicated dealer will offer you an exchange rate based on the live exchange rate and if you choose to accept this you will have secured your currency transaction and subject to settlement you will receive your currency very soon after.
A Forward Contract allows you to lock in an exchange rate for a period of up to 12 months by providing a small initial deposit. This option is very useful during market volatility or when you are still waiting to receive full funds. Forward contracts provide peace of mind, but once you sign a contract you are legally obliged to fulfil the transfer as set out in the contract and if the exchange rate improves you will not be able to alter your contract. If the rates move against you, you may be required to top up the deposit.
If you have the luxury of time and have an exchange rate goal in mind a limit order will allow a broker to purchase your funds at the desired rate when it becomes available.
Exchange rates rarely move in a straight line and during periods of market volatility, rates can sometimes spike for short periods. A Limit Order may help you make the most of these market spikes without having to pay close attention to the markets.
If you’re worried that the currency you are selling is heading for a losing streak, and you want to limit the damage a Stop Loss order may be a suitable choice for those not willing to lose out significantly on a transfer.
Setting a Stop Loss allows you to buy currency at any time, but not below the minimum rate you’re willing to accept.
The Regular Payment Plan (RPP) is designed for clients who need to make regular payments in Euros or Swiss Francs such as a pension transfers, mortgage payments or student fees. The RPP is free; there are no costs or hidden commissions and we do not charge a transfer fee for any payments made via this service. Using the Regular Payment Plan service does not limit you to how many payments you can make, as long as each payment is between £100 and £4000.
The benefits of RPP are clear; by making smaller, regular payments you can mitigate exposure to currency exchange fluctuations. Making regular international payments can be costly via a bank who charges up to £30 per transfer whereas we do not levy any transfer fee for all payments sent via the Regular Payment Plan.
Mixing contract options for the best result
You’re not limited to just one contract option, in fact, there are strong arguments for using a combination of two or three to limit exposure when markets are volatile.
For example, a limit order and stop loss contract can be used to set upper and lower limits. That way, you have peace of mind in the event of further downfalls while leaving an opportunity open to make further gains.
You also have the option of splitting your payments between the different contract options. Perhaps you want to assign 25% of your funds to a Forward contract, 25% on a Spot contract and the rest when a more desirable rate becomes available.
A knowledgeable broker will be able to provide you with further insight into these contract options. Here at Foreign Currency Direct, our team of specialists have helped thousands of clients save money on a transfer by utilising these different contract methods. Why not call one of our currency brokers today on 01494 725 353 to learn more about the currency exchange contracts that are available and that best suit your needs?