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. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
  2. Forex Futures

    An exchange-traded contract to buy or sell a specified amount ...
  3. Losing The Points

    A currency trading term that describes when the banks' buying ...
  4. Ask

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

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

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

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center