FX Futures Hedge Count Walkthrough
Calculate a basic futures hedge count and document residual exposure.
A company expects a $5,000,000 receivable. The EUR/USD futures price is 1.2195 and each contract size is EUR 100,000. Hedge count = exposure value / contract value, with both values stated in the same unit. The common error is dividing $5,000,000 by EUR 100,000 and mixing dollars with euros. That produces a clean-looking but wrong count. Step 1 Calculate contract value: EUR 100,000 x 1.2195 = $121,950. The contract size must be translated into the same currency as the exposure. Step 2 Divide exposure by contract value: $5,000,000 / $121,950 = 41.00041. This estimates the number of standardized contracts needed…
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