"Financial House Logos-TM" JSC

Currency option

The currency option is a financial product that gives the right but not the obligation of the customer for currency exchange (buying or selling) a predetermined exchange rate at a future date.
This is a financial product that ensures exchange rate at which the buyer has the right but not the obligation, to buy (call option) or sell (put option) at a fixed rate of exchange on the date of expiry of the option.

Characteristic:

  • Full hedging.
  • Opportunityfor active participation in a favorable exchange rate.
  • Payment of an option premium
  • Flexible terms of the transaction.
  • European-style options.

From the perspective of the maturity, the options are divided into: European type, in which the option can be executed only at the maturity date. In American-style options the right may be executed at any time to maturity of the option.

Example:

Premium payment entitles without requiring clients to buy dollars and sell euro at a fixed rate at a future date (EUR put/USD call option). The option acts as a guarantee of the exchange rate.

For example, a client can buy a 3-month right to buy dollars (EUR put / USD call option) at a nominal value of € 1,000,000 and strike 1.4100 * against payment of € 20,000 * premium. If the euro exchange rate falls below 1.4100 * (eg 1.4060) * at the maturity date, the client will choose to exercise his right and to sell € 1,000,000 at 1.4100 *, performing the contract. If the euro rises (eg 1.4210) *, the client will not use his right for a fixed rate of 1.4100 * and will choose to fulfill his obligations at the spot market rate on the date of maturity. If the client does not take the option, it runs without any consequences for both sides.


* All interest and currency exchange rates, terms and premiums are indicative and they do not binding on "Financial House Logos-TM" JSC