Currency Option & Trigger Related Options

Features
& Benefits

• Currency Options
  • • Enjoy the ability to hedge your foreign exchange exposures
    • A defensive strategy for hedgers who wish to insure against their FX exposures where the FX risk is known to the hedgers and limited to the premium paid out
    • Currency Option is a contract granting the buyer of the contract the right, but not the obligation, to exchange a fixed amount of one currency for another at a fixed exchange rate at or within a specified future date
    • Basically, there are two kinds of Currency Options:
    • Call option is the right, but not the obligation, to buy a currency against another
    • Put option is the right, but not the obligation, to sell a currency against another
    • Currency Option pricing is dependent on the following factors:
    • Spot exchange rate
    • Strike price
    • Interest rates of the currency pair
    • Time to expiration
    • Expected volatility of the exchange rate
    • Intrinsic features of the option (whether American or European, vanilla or barrier, etc.)

    The price or fee in which the buyer pays the writer of the option is the premium of the option. The decision to exercise the option is dependent on the strike price versus the spot price.
    

• Trigger Related Options
  • • Suitable for customers with a higher risk tolerance, strong view of the market and lesser constraint in timing of requirements
    • Ideal under slowing volatility market conditions in range-bound trading currency pairs
    • Savings cost achieved through structure as opposed to contracting on market rate
    • Available in different currencies (for example SGD, USD, EUR, JPY etc)
    • Flexible choice of tenor
    • No upfront fees payable/charged
• Potential Risks
  • If the trigger is “touched” early in the product lifecycle, the hedger’s remaining requirements may have to be re-hedged at a relatively worse rate under that market condition

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