Before the Trade
This is what John sees before purchasing EUR 20 million.
John’s daylight limit is EUR 50 million. This limit allows him to take any number of open positions in euro up to EUR 50 million at any one time.
The revaluation limit relates to the maximum loss John is allowed to sustain without having to square the position and book the loss.
The mark to market box shows zero at this point because before the trade is booked there is no position to actually mark to market.
Position Control: Impact of FX Spread
Every spot quote has a bid offer spread. Let's now look at the impact of the bid offer on John's trade account immediately after making the initial trade. We will assume that prices have remained constant in the interim.