For overnight trades, the expiry date is the next week-day day after the horizon date, and the delivery date is calculated from the expiry date in the same way as spot is calculated from the horizon date.
Risk Disclaimer: Online forex trading carries a high degree of risk to your capital and it is possible to lose your entire investment. Forex trading may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary.The convention helps the counterparties to understand when payments will be made for each trade.For the convention there are four key dates to consider when trading a particular currency pair: Also, the spot date cannot fall on a US holiday for any currency pair, however foreign exchange trades can settle on this day (e.g.Some retail forex brokers (top list of trusted brokers) will even perform these rollovers automatically for their clients on positions open after 5pm EST.On the other hand, a corporation might wish to use a forex swap for hedging purposes if they found that an anticipated currency cash flow, which had already been protected with a forward outright contract, was actually going to be delayed for one additional month.This is often called the near date since it is usually the first date to arrive relative to the current date.
In the second leg, the same quantity of currency is then simultaneously sold or bought versus the other currency at a second agreed upon rate on another value date, often called the far date.
In this case, they could simply roll their existing forward outright contract hedge out one month. Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors.
They would do this by agreeing to a forex swap in which they closed out the existing near date contract and then opened a new one for the desired date one month further out. The possibility exists that you could lose more than your initial deposit.
In general, the expiry date can be any weekday, even if it is a holiday in one, or both of the currencies, except 1 January.
There are differing conventions depending on the period involved.
Finally, calculate the expiry date using an "inverse spot" operation; e.g., find the expiry date for which the delivery date would be its spot.