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.

RELATED TERMS
  1. Losing The Points

    A currency trading term that describes when the banks' buying ...
  2. Buying Forward

    An investment strategy that involves the buying of money market ...
  3. Ask Size

    The amount of a security that a market maker is offering to sell ...
  4. Bid Price

    The price a buyer is willing to pay for a security. This is one ...
  5. Forward Points

    The number of basis points added to or subtracted from the current ...
  6. Forward Spread

    The price difference between the spot price of a security and ...
Related Articles
  1. Active Trading Fundamentals

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  2. Term

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  3. Term

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  4. Investing Basics

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  5. Forex Education

    Forex Tutorial: Reading a Forex Quote and Understanding the Jargon

    One of the biggest sources of confusion for those new to the currency market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in ...
  6. Investing Basics

    Understanding the Spot Market

    A spot market is a market where a commodity or security is bought or sold and then delivered immediately.
  7. Forex

    Trading Currencies

    Currencies are traded around the world. Learn how to get in.
  8. Forex

    Open Interest

    Whether you are trading currency futures or spot forex, you can make use of the futures open interest to gauge the overall market sentiment.
  9. Forex Education

    Forex Tutorial: What is Forex Trading?

    What Is Forex?The foreign exchange market is the "place" where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies ...
  10. Forex

    Reading A Quote

    Reading a currency quot can be confusing, make sense of numbers you will see.
RELATED FAQS
  1. How is a share premium account taxed?

    Understand the difference between a spot rate and forward rate. Learn why someone would enter into a contract with a spot ... Read Answer >>
  2. How do I use a limit order in conjunction with a bid-ask spread?

    Understand the concept of the bid-ask spread as it applies to trading and how it impacts the pricing of limit orders used ... Read Answer >>
  3. How do day traders capture profits from the difference between bid and ask prices?

    Discover how day traders capture profits from the difference between bid and ask spreads. These spreads blow out during volatile ... Read Answer >>
  4. How do I convert a spot rate to a forward rate?

    Learn how to convert spot rates to forward rates for financial transactions agreed to today but not to be executed until ... Read Answer >>
  5. What is the difference between a forward rate and a spot rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ... Read Answer >>
  6. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center