Posted in Finance, Accounting and Economics Terms, Total Reads: 145
Definition: Flat on a Failure
Flat on a failure is an act of closing an advance deal when financial assets (stocks, Derivatives, bonds) reach a certain level but does not go beyond it. Hence, trade will be flat on a failure and deal will be closed, which will result in reaping the profits earned till now. Here, Trader believes that Financial Assets will not reach the Target Level at that point of time. The Probability of reaching the target level of any Financial Assets is very low. This is due to the External and Internal environment of the business.
A trader is trading in a currency market. It invests $1 Million in the francs (Switzerland Currency). The Trader thought that the Francs will appreciate in the future. Hence, he will book profits from the Appreciation of currency market after a certain time period.
Conversion Rate on 1st Jan, 2016: 1$ = 1.25 francs
Hence one 1 Million $ is now 1.25Million Francs. The Trader expected the Franc to appreciate from 1.25 Francs to .9 Francs. It means expected profit was 0.39 Million in six months.
Conversion Rate on 1st June, 2016 1 $= 1 Francs
Its Actual Amount received is 1.25$. An Actual Earned profit is equal to 0.25 million. A relative less profit of .13 Million