FX hedging cost vs unhedged risk on cross-border revenue.
Inputs
avg quarterly move
Hedging economics
Annual hedging cost—
Annual exposure protected
—
Worst-case unhedged loss
—
Hedge cost as % of revenue
—
Strategy comparison
Strategy
Annual cost
Worst case
Best for
About this calculator
Currency hedging is one of the most overlooked operational decisions in cross-border ecommerce. Brands sell in EUR or GBP for months, see steady margins, and discover after a 7% FX move that an entire quarter\'s profit on European sales has evaporated. Hedging is cheap insurance for that risk, but most operators ignore it until they\'ve been burned.
This calculator compares hedging strategies: forward contracts (cheap, lock the rate), currency options (more expensive but flexible), and unhedged exposure (free, but volatile). The model uses observed FX volatility (~5-8% per quarter for major currencies, more during uncertainty) to compute worst-case unhedged loss versus the hedging cost.
The strategic threshold: at $50K+/month of foreign-currency revenue, hedging is usually worth the small cost (0.1-0.5% of revenue for forwards). Below that, the contract minimums and operational complexity outweigh benefit. Above that, the asymmetry (hedge costs ~$5K to protect ~$80K of potential downside) is hard to ignore.
Pair with the Currency Conversion Margin calculator (margin sensitivity to FX moves), the International Shipping Cost calculator (other cross-border costs), and the VAT Registration Thresholds calculator (compliance side of foreign sales). Most multi-region DTC brands above $1M annual cross-border revenue use a 30-90 day rolling forward program through their bank or a service like Wise Business or Cambridge.
Frequently asked questions
When should I hedge currency?
Once you have $50K+/month of revenue in a non-USD currency (EUR, GBP, CAD, AUD). Below that, hedging cost outweighs benefit. Above that, FX swings of 5-10% can wipe months of profit. Most multi-region DTC brands hedge once they exceed ~$1M annual revenue per currency.
Forward contracts vs options?
Forwards: lock the rate, mandatory exchange at maturity. Cheaper (no premium), but you can't benefit if FX moves favorably. Options: pay a premium to "lock the worst case" while keeping upside. More expensive (1-3% of notional), but flexible. Most ecommerce uses forwards for predictable revenue, options for uncertain.
Typical hedging cost?
Forwards: nearly free for major currencies (USD/EUR/GBP) — broker spreads ~0.1-0.3% of notional. Options: premium typically 1-2% of notional for 90-day at-the-money options. Plus broker fees ($10-50/contract). Total cost rarely exceeds 0.5% of revenue if managed well.
How long should I hedge for?
Match the maturity to the cash flow. If you sell in EUR with 30-day repatriation, hedge 30 days forward. Don't hedge 12 months — too much can change and you lose flexibility. Most rolling hedge programs use 30-90 day forwards rolled monthly.
What's the actual risk if I don't hedge?
Currency moves of 5-10% in 90-day windows are common. Major events (Brexit, COVID, election cycles) can produce 15-20% swings. On $1M of EUR revenue, an unfavorable 8% move = $80K of margin compression. Hedging that exposure for ~$5K of contract cost is asymmetric.