"Financial House Logos-TM" JSC

Currency option with compensation of the option premium

Currency options, with compensation of the options premiums - financial product, limiting currency fluctuations in a corridor of an upper (cap) and lower limit (floor).
Financial product, limiting the possible fluctuation of the exchange rate in a predetermined range without paying a separate premium by the client (the client’s costs for a purchase at a fixed lower boundary offset with the sale at the upper limit of the bank).

Key features:

  • Determing of a corridor of an upper (cap) and lower limit (floor) of the exchange rate.
  • The client assumes the risk of a fluctuation of the exchange rate within the specified range.
  • Minimum nominal value of the transaction - € 500,000.
  • Flexible conditions of the deal.
  • "Zero cost" strategy in terms of the premium paid.

Example:

A client wants to reduce the potential fluctuations of his payment duties in dollars. By “Currency options, with compensation of the options premiums” the client is able to determine the lowest exchange rate (lower limit-Floor) and at the same time to participate to a certain level (upper limit - Cap) in any favorable movement in the exchange rate.

For a 3-month period the client can "lock" his duties at levels between EUR / USD 1.3900* (lower limit) and EUR / USD 1.4200* (upper limit). This specific product, that combines the purchase and the sale of two options, limits the exchange rate fluctuations for the client in the event that at the maturity date the exchange rate euro / dollar is established outside the preset upper or lower limit. If EUR / USD is above the upper limit (1.4200)*, the client, under his sold option, is obligated to sell euro and buy dollars at 1.4200*. If the rate is between 1.3900* and 1.4200* the client uses the actual spot rate.

If it is under 1.3900*, the client, under his acquired option, exercises his right to sell euro at 1.3900*.


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