opic: Hedging and Speculating using Currency Derivatives In general, all currency derivatives, including currency forward, futures and options (call and put), can be used for hedging and speculation. But each of them has advantages and disadvantages (or limitations) when being used for hedging and speculation. Factors to be considered are, for examples, flexibility, standardization, cost (premium), etc.. For this week's discussion, please first provide your general thoughts on scenarios in which your think one currency derivative is preferable for hedging or speculation than others. Then consider following cases when discussing. 1. Cowboys Co., a U.S. sports exporting company, has half of its foreign sales in UK and receives British pounds each month. Given the strength of the U.S. dollar and falling of pounds, the company wants to hedge its future British pound receivables. Although the company expects the British pounds to continue to depreciate, it is also gauging the possibility that pounds might become stable or even start to appreciate against dollar, as UK has raised its interest rates to 2.25%, the highest level since 2008. What is your suggested hedging strategy for the company? 2. Should speculators use currency futures or options? What is the tradeoff between using currency futures or options for speculating? Are there cases where currency futures or options should be used to speculate