Typically an ‘option’ is a contract that gives you the right – but not the obligation – to exchange money at a pre-agreed exchange rate on a future date (both specified by you). You are not obliged to deal at the pre-specified rate and can choose to deal in the spot market if the spot rate in the future is more favourable. However, for the extra flexibility that foreign exchange options can provide, there is a cost to purchase these contracts in the form of an up-front premium. This premium is non-recoverable.
In many ways, simple (‘vanilla’) options act like an insurance policy* – you pay a premium to protect a ‘worst case rate’ (the strike rate of the option) but you have unlimited upside if exchange rates move in your favour. Foreign exchange options can be taken out on any major currency for a period of anywhere between one week and two years.
Below we have the various option contracts that we currently offer:
- European-style forward extra
- Forward extra
- Participating forward
- Range forward
- Window forward extra
To find out more about options or discuss if they are suitable for you and your business please call 020 7823 7400.
Foreign exchange options and other derivative products are not suitable for everyone and you should ensure you fully understand the risks involved before purchasing these products. Moneycorp Financial Risk Management Limited is authorised and regulated by the Financial Services Authority for the conduct of designated investment business.
* Foreign exchange options are not pure protection insurance policies or general insurance policies as defined by the Financial Services Authority.