FX Hedging Strategies

We work with our clients to collaboratively identify and manage increasingly complex currency exposures. Our process is built on developing a deep understanding of the risks that your business faces, before delivering a risk management strategy created to meet your specific objectives. Our solutions ‎are designed to grow with you, and our team is dedicated to working with you every step of the way.

Market Orders

Changes in the currency markets can occur far faster than human reaction times. Using automated Market Orders, you can ensure that your business is prepared to harness opportunity or protect against downside risk when unpredictable moves occur.

Currency Options

Options allow you to protect your business against harmful currency changes, while providing the flexibility ‎to capitalize on favorable movements. They can be customized to achieve budget rates, protect risk thresholds, and harness market outcomes.

Our 5-Step Hedging Process

We work with you to build a hedging strategy that effectively manages risk and best fits your market position. This is a dynamic, fluid process in which your account manager provides regular market updates and product information so that you can consistently protect your profit margins, while remaining flexible and maintaining the ability to participate in favorable market movements.

Infographic outlining the five-step hedging process: 1) Identify, 2) Develop, 3) Specify, 4) Select, 5) Execute. Infographic outlining the five-step hedging process: 1) Identify, 2) Develop, 3) Specify, 4) Select, 5) Execute.

Market Orders

Our expert traders and award-winning systems can stay on top of markets for you – monitoring conditions across all active sessions so you can execute your deal to the optimal moment. All Cambridge market orders can be placed either on an overnight basis or as “good-til-cancelled,” which means that the order will remain in force until it is either executed or cancelled by you.

A target order allows you to capitalize on favorable market movements. You specify the amount of currency that you wish to exchange and a rate that is better than prevailing levels. If the market moves to your desired point, a spot, forward, or option trade is automatically executed, locking in your gains.

A stop order allows you to protect against unfavorable market movements. You specify the amount of currency that you wish to exchange and the worst-case rate that you are willing to accept. If the market moves to this risk threshold, a spot, forward, or option trade is automatically executed, ensuring that you are not exposed to further loss.

A trailing stop order allows you to protect against loss while helping you to capitalize on favorable market movements. You specify the amount of currency that you wish to exchange and the worst-case percentage change that you are willing to accept. If the market moves by more than this amount, a spot, forward, or option trade is automatically executed, ensuring that you are not exposed to further loss. If the market moves in your favor, the trailing stop moves with it, effectively harnessing gains.

You can place a target order and stop order simultaneously, by specifying that if one order is filled, the other must be automatically canceled. This eliminates the possibility of double-booking, allowing you to capitalize on favorable moves while protecting against loss.

  • Target Order

    A target order allows you to capitalize on favorable market movements. You specify the amount of currency that you wish to exchange and a rate that is better than prevailing levels. If the market moves to your desired point, a spot, forward, or option trade is automatically executed, locking in your gains.

  • Stop Order

    A stop order allows you to protect against unfavorable market movements. You specify the amount of currency that you wish to exchange and the worst-case rate that you are willing to accept. If the market moves to this risk threshold, a spot, forward, or option trade is automatically executed, ensuring that you are not exposed to further loss.

  • Trailing Stop Order

    A trailing stop order allows you to protect against loss while helping you to capitalize on favorable market movements. You specify the amount of currency that you wish to exchange and the worst-case percentage change that you are willing to accept. If the market moves by more than this amount, a spot, forward, or option trade is automatically executed, ensuring that you are not exposed to further loss. If the market moves in your favor, the trailing stop moves with it, effectively harnessing gains.

  • Order Cancels Order

    You can place a target order and stop order simultaneously, by specifying that if one order is filled, the other must be automatically canceled. This eliminates the possibility of double-booking, allowing you to capitalize on favorable moves while protecting against loss.

Forward Contracts

The most common hedging tool, forward contracts, fix a defined future date at which to buy or sell a stated amount of currency at an agreed rate. All forwards can be booked through our leading-edge trading platform, Cambridge Online.

Fixed Forwards

This standard forward is used for buying or selling currencies that are date-sensitive. The transaction is completed for the total amount of the contract on a specified date.

Open Forwards

You also have the option of an “open” forward, which allows the flexibility of an open time period in which to settle. Open forwards also allow you to draw down against the original amount contracted.

Hedging Strategies

We offer a robust suite of structured options designed to help you harness volatility, take advantage of market fluctuations and protect your bottom line. Certain options to manage your risk require no deposit or margin.

Foreign Exchange Swaps

Foreign exchange swaps are contracts wherein one currency is sold against another at inception, with a commitment to re-exchange the principal amount at the maturity of the deal in order to deploy cash resources as efficiently as possible. These swaps are structured as spot trades combined with offsetting future-dated forward contracts, so that the net foreign exchange exposure is removed and funds are positioned where needed.

Non-Deliverable Forwards

Non-deliverable forwards also fix the rate at a defined future date but delivery of the foreign currency does not occur. Instead, the difference is settled in domestic currency. Non-deliverables are used to protect against rate movements in inaccessible markets.

Vanilla Options

Vanilla options are financial contracts that give you the right, but not the obligation to buy or sell a stated amount of a currency at a predefined price over a certain period of time. Due to this functionality, they are typically used to protect uncertain future cash flows against exchange rate volatility.

Structured Options

Structured options are contracts that combine vanilla options with other special features to create a customized hedging instrument to fit a particular situation or capitalize on a potential market outcome. We can offer a variety of structured options to qualified parties. Contact a Cambridge Options Specialist to determine your needs and to view our literature on these products.

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