Most companies, whether small or large make crucial decisions concerning pricing and profit ahead of time.  Due to market volatility, these decisions are extremely difficult to make. 

Many companies use hedging as a tool to help alleviate concerns due to market volatility.  A hedging transaction is one that protects an asset or liability against fluctuations in the foreign exchange rates. For commercial foreign exchange transactions, the most popular hedging tool is known as a Forward Contract. A forward contract allows a company to lock in a rate of exchange based on today's spot price (with an adjustment for the 'forward points') for a future date when they actually need to buy or sell a foreign currency.

There are two types of Forward Contracts known as a;
• Fixed Term Contract
• Open Window Contract

Fixed Term Contract
A fixed term contract gives the client the opportunity to fix an exchange rate today for a specific date in the future.  This rate will be guaranteed in the future irrespective to future market volatility and conditions.  This alleviates a lot of stress from the client’s perspective, as the client knows that his profit is secure for the course of the forward contract.

Open Window Contract
An open window contract is the same as the fixed term contract in regards to locking the rate for a future date, however the specific date is not determined. Instead, a range or "window" is provided when the contract can settle. This type of contract is useful for example when a client does not know when he or she will be receiving the funds or having to pay an invoice.  Bendix has a maximum window of thirty days.  For example a client can fix today’s rate for a future settlement between July1st to July 31st.  During this window, a client can redeem his entire contract or draw down  a partial amount against the contract once or as many times as he needs as long as the full contract amount is taken before the expiry date. 

Securing a Contract
To secure a forward contract, the value of the contract must be a minimum of fifty thousand Canadian dollars worth of one specific currency. Furthermore, Bendix requires a maintainable margin of five percent be paid up front as a deposit for all USD/CAD dollar contracts, and a maintainable margin of ten percent for all non USD/CAD dollar contracts. The deposit is taken as a collateral against the potential future position assumed by Bendix.
This deposit is either refunded back to our client upon the expiry or redemption of the forward contract. 

All margins are maintainable.  This means that, it is the clients responsibility to monitor their contracts to make sure that the market value of their open positions hasn’t dropped below the required margin level.  If the client’s position and the current market rate now places the margin below that required, Bendix will contact these clients to collect more funds to bring the contract’s margin back up to the required level.  If the market moves back into the clients favor, the client has the right to ask for the excess part of his margin back from Bendix.
In the event that an account exceeds it’s minimum allowable margin, the trader has the right to liquidate the contract at his own discretion.

Rollovers
In the event that the contract, whether spot or forward, expires and no settlement is made, the client has a few options available.
• Close out contract
• Rollover contract

Closing Out Contract
This option would be used if the client made an error in purchasing, or if the earlier requirement is no longer needed.  The contract would be liquidated out at the current market rate.  If the rate is in the clients favor, he would incur a profit.  If the rate is not favorable, the client would incur a loss.  The profit or loss would be paid to or from the client upon the execution of the closeout at maturity of the contract.

Rollover  Contract
This option would be used if the client needs more time than they originally thought.  If the original contract was a spot transaction, depending on the currency type, Bendix would collect a maintainable margin as explained above, and charge the rollover pip charge based on the market rates and time value needed.
If the contract is a forward, the appropriate amount of pips would be added on to the original forward rate based on the current interest rates and time needed.  The margin would have to be maintained at the agreed percentage.