What are Foreign Exchange Options (FX Options)?
An FX option provides you with the right to but not the obligation to buy or sell currency at a specified rate on a specific future date. A vanilla option combines 100% protection provided by a forward foreign exchange contract with the flexibility of benefitting for improvements in the FX market. This works like an insurance contract. In exchange for such a right (without the obligation), the holder usually pays a cost which is known as the Premium for the FX Option. Currency market fluctuations can have a lasting impact on cash…
Read More