Earning The Points

AAA

DEFINITION of 'Earning The Points'

A currency trading term that describes when the forward ask price is lower than the spot bid price, resulting in a gain for the trader. A trader is gaining the points when he or she sells at one price now then agrees to buy for less in the future. Gaining the point only refers to the difference between sell and buy prices and does not take the time value of money into account.

This is the opposite of "losing the points".

INVESTOPEDIA EXPLAINS 'Earning The Points'

If the individual sells at the higher ask price in the spot market, then buys at a lower bid price in the futures market, he or she is gaining the points.

For example, suppose that Peter sells the British pound at 2.2055 dollars per British pound in the spot and enters into a forward contract to buy the pound back at 2.2000 dollars per pound in the future. Peter is gaining the points, in this case 0.0055 dollars per pound.

RELATED TERMS
  1. Ask

    The price a seller is willing to accept for a security, also ...
  2. Currency

    A generally accepted form of money, including coins and paper ...
  3. Bid-Ask Spread

    The amount by which the ask price exceeds the bid. This is essentially ...
  4. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  5. Currency Risk

    A form of risk that arises from the change in price of one currency ...
  6. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
Related Articles
  1. The Fundamentals Of Forex Fundamentals
    Forex Education

    The Fundamentals Of Forex Fundamentals

  2. Playing The Gap
    Forex Education

    Playing The Gap

  3. How To Place Orders With A Forex Broker
    Forex Education

    How To Place Orders With A Forex Broker

  4. Getting Started In Forex
    Options & Futures

    Getting Started In Forex

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center