Currency Option Transaction
What is a currency option transaction?
A currency option transaction is the right to buy or sell certain currency in the future at the currency exchange rate of the day of making the transaction. Having made the transaction you will have the right (not the obligation!):
- To buy the sum of the currency specified in the transaction;
- To make settlements on the established day or by the established day (on the established day - European option transactions, by the established day - American ones);
- To buy or sell currency at the strike price.
The buyer shall pay to the bank a certain charge called the bonus for the right of option. This is a compensation for the risk incurred on the bank. The bonus of the option transaction shall depend on the following:
- The current exchange rate;
- The rate of carrying out the option transaction;
- The validity term;
- The volatility;
- Difference in interest rates.
We offer option transactions of two kinds:
- Currency call transaction, that is, transaction when the right is acquired to buy the desired currency on the established day in the future at the exchange rate of the day of making the transaction;
- Currency put transaction, that is, transactions when the right is acquired to sell the desired currency on the established day in the future at the exchange rate of the day of making the transaction.
Advantages of the currency option transaction:
- The client who has made the currency option transaction does not only protect himself/herself against the currency exchange risk but also retains the possibility to derive profit of almost unlimited amount in the event favourable conditions form on the market;
- Having acquired the currency option transaction you risk only within the amount of the bonus paid;
- There are no additional charges;
- No restrictions are applied to making these transactions.
When does it make sense to make the currency option transaction?
The currency option transaction does not only allow the buyer to protect himself/herself against unfavourable changes in the currency exchange rate but also, in the event of favourable conditions formed, to make profit.
| For more information about currency exchange transaction make a call by phones +370 5 266 4657, +370 5 266 4623 in Vilnius or send an electronic query. |
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