Article: Currency Options
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Currency Options
One of the ways to hedge a FOREX transaction is with what is called a currency option. A currency option gives the holder the right to buy or sell a specified currency during a specific time period, but the holder is not obligated to buy or sell.
Call options and Put options are the two types of currency options. With a call option the holder has the right to buy currency. A Put option gives the holder the right to sell.
The worth of a call or put option at time of expiration is equal to the value realized by the holder in exercising the option. If the holder gains nothing, the option is worthless. The intrinsic value of the option is the value when the option is bought or sold.
Strike priced is what drives the intrinsic value of an option. A ca...
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