Hedging: EUR Payroll Protection
- The Setup
- The Trade
A European SaaS company earns revenue in USD but pays its engineering team in EUR. Monthly
payroll is approximately EUR 200,000. At the current EUR/USD rate of 1.0800, this costs
$216,000. The company wants to lock in this rate for next month’s payroll.
Speculation: ECB Rate Decision Play
- The Setup
- The Trade
A trader expects the ECB to signal a more dovish stance at next week’s meeting, which would
weaken the EUR against USD. They want to profit from this expected move.
Carry Trade: Capturing the Forward Basis
- The Setup
- The Trade
When USD interest rates exceed EUR rates, EUR/USD forwards trade at a premium to spot (the
forward price is higher). A carry trader captures this premium by selling the forward and waiting
for convergence to spot at maturity.
Risk Management Tips
Size your margin to your conviction
Lower leverage (more margin) for uncertain outcomes. Higher leverage only when you have high
conviction and a tight stop-loss plan.
Match tenor to your time horizon
Use 1D for intraday events, 1W for weekly catalysts, 1M for structural positions. Don’t use a
1M tenor for a trade that depends on tomorrow’s data release.
Monitor your equity
Track position equity relative to the maintenance margin. Add margin before it’s too late — you
can rescue a position by adding margin even when it’s liquidatable.
Understand the fixing price
Settlement uses the Pyth spot price at 4 PM UTC, not the forward price. A position can be
profitable on the forward price but settle differently at the fixing.
Next Steps
Margin
Deep dive into margin mechanics and leverage
PnL Calculation
Exact PnL formulas and worked examples
Quick Start
Open your first position on Sepolia