The mini dollar is a mini future contract of the American currency with a value negotiated at the time of purchase and sale of the same on the Stock Exchange, which calculates the adjustment of this contract on a daily basis, allowing investors a qualitative follow-up..
Futures contracts are investment modalities whose values vary according to another type of financial model.
In this post, specifically, we will deal with the mini dollar and the way in which the dollar exchange rate – the American currency – influences the financial market in this sense.
If you still don’t know what the mini dollar is, or even if it’s worth investing in, keep reading and learn everything you need to know about it!
What are mini contracts?
Let us start with the concept of the question: the mini dollar is a mini-contract present in the future market of the Stock Exchange, as we advanced in the introduction.
This means, in a nutshell, that we are buying and selling financial market products taking into account a future date that is previously determined.
But if all this already seems confusing to your investor profile, here is some good news: this type of investment is known as “mini” through a simple objective of making it more accessible to individuals.
A rich way, therefore, to bring UK citizens closer to the best options for making their assets profitable.
And what is the future market?
The concept is linked to a virtual environment that is operated by the Stock Exchange and in which investors negotiate contracts for a future date.
This creates a dynamic different from the traditional purchase and sale of shares in the sector, but has identical results: you can earn money from the valuation of these contracts or account for losses if they devalue in the period.
What is the mini dollar and how does it work?
In the context highlighted above, the mini dollar is a mini future contract for the American currency. The value of these contracts is negotiated at the time of purchase and sale.
In addition, the Stock Exchange calculates the adjustment of this contract on a daily basis, allowing investors a qualitative follow-up.
It is common for the mini dollar to be traded only on business days, from 9 am to 6 pm. It is worth noting that the contract is always quoted in UK residents currency and that the amount is credited directly to the investor’s account.
And how does the negotiation process for this model of contract work? Well, first of all, it is important to know what the value of a dollar amount is in the future market and create estimates to understand if it will – or not – appreciate over time.
This favors future decisions and guarantees less risk for your investments.
What is the Mini Dollar code?
Each mini-contract is identified by the acronym WDO, which is its trading code – it corresponds to a letter and two sequential numbers that correspond to the month and year of expiration of the contract in question.
To better understand, let’s start by explaining the corresponding codes for each month of the year, looking like this:
- January (F);
- February (G);
- March (H);
- April (J);
- May (K);
- June (M);
- July (N);
- August (Q);
- September (U);
- October (V);
- November (X);
- December (Z).
So exemplifying a mini-dollar contract due in October this year would correspond to the acronym WDOV20, where “V” is the code for the month and, the number 20, the year for expiration.
How to invest in mini dollar?
Now that we understand the concept of the mini dollar and also its meaning and nomenclature in the financial market, it’s time to understand how you can diversify your investment portfolio and use it among your assets.
The first step for this is to hire a securities broker to broker the business on your behalf, opening an account specifically for that.
Soon after, you should be given access to the mini dollar trading platform, which can be accessed by computer, tablet or smartphone.
The next step is to assess which contracts have to do with your needs and objectives – for this, the professional of the chosen brokerage firm can assist in the process – and complete the negotiation.
Important point here: it is necessary to have a guarantee margin that is requested by the broker itself. This value varies between companies, but refers to the certification that you can afford any losses, if they occur.
It is also worth mentioning that you can learn more and more about the subject and learn everything about your heritage. To give a little push in the right direction read the post: Investment portfolio management: how and why to do it? [GUIA do investidor iniciante].
Is it worth investing in mini dollar?
In summary, we can say that it is worth investing in dollars, yes. The currency remains well valued in the market, but it is important to understand whether this type of modality has to do with your expectations and objectives when investing your money.
In the case of the mini dollar, specifically, it is important to note that it is a good alternative because it is one of the most affordable investments in the future market.
It is an interesting way then to have access to this type of investment portfolio, even if you are not yet an expert on the subject.
What are the advantages and risks of this type of investment?
Among the advantages of the mini dollar, we can highlight the high liquidity of this investment and also its flexibility, as we mentioned in the previous topic. In other words: trading is quick and simplified, allowing you to diversify your investment portfolio.
On the other hand, it is important to pay attention to the risks of mini dollar contracts – which, after all, exist as they do with any other investment.
Market fluctuations are the ones that should be most under constant monitoring to avoid losses over time.
Are there any costs to invest in mini dollar?
Yes. Below, we will highlight them so that you have no surprises when it comes to negotiating your mini dollar contracts. Are they:
- brokerage fee: it is a charge practiced by the stockbroker to act on your behalf on the Stock Exchange – this price may vary between companies;
- ISS: is a municipal tax paid in conjunction with the aforementioned tax;
- emoluments – mini-contract negotiation / settlement fees (amount charged by BM & FBOVESPA and also by CBLC);
- custody fee: charged on the value of your investment portfolio;
- Income Tax: must be paid from profits exceeding £ 20 thousand.
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Now that you know everything about the mini dollar, tell us what you think of this type of investment. Use the comments field below and let us know if you intend to invest in the future market!