Earning The Points


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".

BREAKING DOWN '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.

  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Ask

    The price a seller is willing to accept for a security, also ...
  3. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
  4. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  5. Bid-Ask Spread

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

    A form of risk that arises from the change in price of one currency ...
Related Articles
  1. Forex Education

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  2. Forex Education

    Playing The Gap

    Learn how you can earn money by analyzing the disruptions in normal price patterns.
  3. Forex Education

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
  4. Options & Futures

    Getting Started In Forex

    Before entering this market, you should define what you need from your broker and from your strategy.
  5. Forex Education

    Forex Tutorial: The Forex Market

    In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market.
  6. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  7. Options & Futures

    Terrorism's Effects on Wall Street

    Terrorist activity tends to have a negative impact on the markets, but just how much? Find out how to take cover.
  8. Investing Basics

    Explaining the Liquidity Preference Theory

    According to the liquidity preference theory, investors demand interest in return for sacrificing their liquidity.
  9. Options & Futures

    Ultra ETFs Are Not Your Father's ETFs

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  10. Active Trading Fundamentals

    How to Trade Dow Jones Future Contracts

    Learn about the Dow Jones Index futures contracts available and obtain step-by-step instruction on how to trade the stock index futures.
  1. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center