ACCA AFM September 2026: The 40.4 Contracts Mistake That Costs Marks in Every Currency Futures Hedge
You cannot sell 40.4 futures contracts. Round to 40, ignore the leftover, and say so — or the AFM examiner will keep taking marks off you for a hedge no bank would ever execute.
What the examiner actually said
The September/December 2025 AFM examiner's report (Passmore Co, Q3) tested a rupee receipt of R202m hedged with forwards, futures and options. Most candidates did the maths well. Then a "significant number" wrecked the answer by working with 40.4 contracts. The report is blunt: companies can only trade whole contracts, so the answer is 40. The unhedged balance is treated as immaterial unless the question says otherwise — you do not need to mop it up on the forward market.
The second recurring loss was even cheaper to fix. Candidates reached an expected outcome without ever stating whether they were buying or selling, which month, or how many contracts. The examiner's words: a recommendation to a company "should be specific", and "valuable marks will be lost" if that line is missing. For Passmore, the whole line is: sell 40 September rupee futures.
Third, basis. Most candidates used the lock-in method correctly — basis = spot minus futures price, shrinking linearly to zero at expiry. Those who got it wrong mostly used the wrong period for unexpired basis. Passmore's deal was 1 February to 31 August against September futures: eight months of life, one month unexpired, so unexpired basis is 1/8 of opening basis. Not 1/7. Not 7/8.
Same story on the options leg: fractional contracts meant the premium was wrong, and plenty of candidates converted a premium that was already quoted in dollars. ACCA's own technical article (Foreign currency futures – step by step, updated February 2026) confirms both the lock-in and future-spot-rate methods earn full credit, and openly notes that rounding down contracts means hedge efficiency will be below 100%. That's expected. It isn't an error to be fixed.
Worked example: wrong vs right
Spot R80.00/$, September futures R82.00/$, contract size R5m, receipt R202m on 31 August, today 1 February.
Wrong answer: "Contracts = 202/5 = 40.4. Futures outcome = R202m at lock-in rate. Hedge the remaining 0.4 contracts using the forward rate." Then the outcome is calculated on R202m, no mention of sell/buy, no month, and unexpired basis taken as 1/7 because the candidate counted February to August as seven months.
Right answer: "Sell 40 September rupee futures (202/5 = 40.4, rounded to 40). Amount hedged R200m; R2m balance immaterial and unhedged." Basis = 80.00 − 82.00 = −2.00. Unexpired basis on 31 August = −2.00 × 1/8 = −0.25. Lock-in rate = 82.00 − 0.25 = R81.75/$. Receipt = R200m / 81.75 = $2.446m, plus R2m converted at whatever spot turns out to be. Three lines of setup, and every marking point is on the page.
What to do
1. Write the contract sentence first. Before any numbers: buy or sell, month, whole number of contracts, amount actually covered. Do this for futures and options. It takes 15 seconds and it's where the cheap marks are.
2. Count the months on a timeline. Draw today → transaction date → futures expiry. Unexpired basis is (months from transaction to expiry) ÷ (months from today to expiry). Write the fraction down, then calculate.
3. Recommend, using your own figures. The examiner said "quite a few" candidates never recommended anything, despite the requirement asking for it. Put the forward, futures and option outcomes in one line each, pick one, and give a reason tied to the scenario — the reasoned recommendation is worth up to 4 of the 12 marks.
Bottom line
AFM passed 44% in March 2026 and 45% in December 2025 — it has sat between 44% and 46% for six sittings running. Passmore Co was described by the examiner as "very similar to previous foreign exchange hedging questions", and the errors were all presentation, not technique. Whole contracts, stated direction, correct fraction, clear recommendation.
You can't trade 0.4 of a contract. Stop trying to hedge it.