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Currency options

What is a CURRENCY OPTION?

A CURRENCY OPTION is a financial instrument for hedging against risks that may arise from potentially negative developments in a currency pair. It also gives clients the possibility of profiting from positive developments in the forex market. When buying CURRENCY OPTIONS, the client has the option to buy or sell the given currency at a pre-agreed exchange rate on a specified future date. To obtain this option, the buyer of the currency option pays the seller a so called option premium.

What are the benefits of a CURRENCY OPTION?

A CURRENCY OPTION allows clients to secure their funds against unfavourable changes to exchange rates, as is the case of a forward transaction. Unlike a forward transaction, the client can choose not to use the option and implement the trade on a given day for a better spot rate than the fixed rate would be. In this way, clients can participate in favourable rate developments.
 
  • When buying a CURRENCY OPTION, the client is not required to lodge financial collateral. Instead, the buyer pays a non-refundable option premium.
  • When selling a CURRENCY OPTION, the client is required to lodge financial collateral and in this case they collect the premium.

Variants of CURRENCY OPTIONS

  • Call option - gives the holder the right to purchase the primary currency (the first currency in a currency pair) for the secondary currency (the second currency in a currency pair) at a predetermined rate in future.
  • Put option - gives the holder the right to sell the primary currency for the secondary currency at a predetermined rate in future.

Variants according to settlement

  • American option - the option holder has the right to exercise the option at any time between the date of agreement and the date of expiration.
  • European option - the option holder has the right to exercise the option only on the day of expiration.

Conditions for acquiring a forward contract:

 
By entering into currency derivative transactions, the client assumes some types of risks (market risk – currency and interest rate risks, counterparty risk, liquidity risk, leverage). Everything always depends on the purpose and method of use of the derivative transaction concerned. Before signing a Framework Agreement and closing a transaction or at any time on request, dealers will be glad to explain you the individual types of risks, whether orally or in writing.
 
 
By entering into hedging transactions, all service providers become  involved in the counterparty of these transactions. Such involvement is covered in the following ways:
  • Blocking of client funds
  • Dealing limit
  • Dealing limit secured by bill of exchange
 

Our dealers  are happy to discuss the possibilities and individual conditions for hedging foreign exchange risks and will suggest the best option for your business.

Do you want to know more about our services and products?
Contact us
+420 498 777 770
Warsaw - AKCENTA CZ has been active in Poland since 2011
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AKCENTA CZ a.s. does not assume any liability for any damage or loss of profit caused to any parties by using the information and data contained on this website or in the company’s marketing material. AKCENTA CZ a.s. warns that entering into derivative transactions mentioned on this website or in the company’s marketing material involves risks. Clients are obligated, to the broadest extent possible, to familiarise themselves with these risks, understand them and take them into consideration and, if necessary, to ask for further information. More details on the risks related to derivative transactions are available on the website of AKCENTA CZ a.s.: Selected risks related to closing derivative transactions. Information on the risks can be also obtained from the employees of AKCENTA CZ a.s.
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