How do currency futures and currency forward contracts differ?

6. A large French wine maker has contracted to sell 5,000,000 EURs of wine to a U.S. wine importer. The U.S. importer will only pay an invoice in USDs. The account is to be paid in 60 days. The USD invoice amount is to be set at the current spot exchange rate S(EUR per USD) =1.00/$, implying an invoice amount of 5,000,000 USDs. The French wine producer gets a 60-day ahead forward rate quote from its bank of F = .9900 EURs per USD.

a.If the actual EUR-USD spot rate in 60 days turns out to be the forward rate quoted above, what will be the EUR value of the USD receivable at that point?

The wine maker also wants to consider options on the EUR to hedge the currency risk. Will the French wine maker want to buy put or call EUR options?

The following strike prices and underwriting premia are available for 60-day EUR options.

Strike Price (in EURs)	Premium per EUR (in USDs)
1.0000	0.010
0.995	0.008
0.992	0.001

Given these data, should the wine maker hedge with the EUR options, and if so which option, or use the forward contract? Fill in the table below and explain your work.

	Cost of Options
Strike Price	Premium	Max Potential Loss	Premium plus Max Potential Loss
1.00	50000	0	50000
.995
.992