Quanto Futures and Options
Quanto Futures are cash settled Derivatives in which the underlying traded product is denominated in a foreign currency that is settled in another domestic currency at a fixed exchange rate. These products appeal to market participants seeking foreign commodity exposure without the corresponding risk of adverse exchange rate fluctuations. The JSE’s wide range of Quanto Futures products reference energy products, metals and Soft Commodities.
Who should use this?
Investors will typically use Quanto Futures when they feel that the price of an asset will appreciate but that the currency in which the asset is denominated will depreciate relative to the investor’s domestic currency. Commodity investors and speculators hoping to make a profit on price movements in the Futures Contract price based on the foreign referenced commodity would do well to consider this product.
- Protects investors from rand-dollar exchange rate fluctuations allowing them to benefit directly to the dollar price performance of the underlying commodity.
- Enables effective price risk management.
- Enables identification of short- and long-term price and volatility patterns.
- Gain exposure based on expectation of directional price, spread movement or volatility of the foreign commodity.
- Easy access to the international commodity market with a contract traded in rands.
- Given the fairly risky nature of commodities, investing in this product is not for everyone. It is better suited to more experienced investors.
How to get it
To access this product, register as a client with an authorised JSE member firm, deposit the required initial margin and sell or buy according to your needs.
- No limits apply to individuals, foreigners or corporate entities.
- Pension funds and long-term insurance companies are subject to their 25% foreign allocation limits.
- Asset managers and registered collective investment schemes are subject to their 35% foreign allocation limits.
- For all the details about qualifying factors, speak to your broker.