Foreign Currency Options

[Borscht Mat]

Hi

I am going to spend some cash in the US and Europe towards the end of the year and I want to buy some options to lock in today's exchange rate (for let's say > $100k and <$1M.

Anyone done this before ? Did you use a broker or through a bank ? Any idea of the cost ? My expectation is if I am getting an option to buy at today's rate then the cost will be pretty small (it is not like I am betting that the rates will move one way or another).

Any experience ?

M

 

[Retzlaff]

Talk to a bank, but I would say futures would be a cheaper alternative. With options however, you could structure it so you have a minimum payoff to protect yourself against downward risk, but still have the opportunity for upside gain. Options I think would cost more.

If you purely want to lock in a rate, I think the bank would advise you use futures.

 

[burto]

Talk to a bank, but I would say futures would be a cheaper alternative. With options however, you could structure it so you have a minimum payoff to protect yourself against downward risk, but still have the opportunity for upside gain. Options I think would cost more.

If you purely want to lock in a rate, I think the bank would advise you use futures.

Correct

 

[acker]

Talk to a bank, but I would say futures would be a cheaper alternative. With options however, you could structure it so you have a minimum payoff to protect yourself against downward risk, but still have the opportunity for upside gain. Options I think would cost more.

If you purely want to lock in a rate, I think the bank would advise you use futures.

Rule 1 Futures : For every winner there is a loser
Rule 2 Futures : It is indiscriminate

When was the last time you played two up ?

 

[Retzlaff]

Rule 1 Futures : For every winner there is a loser
Rule 2 Futures : It is indiscriminate

When was the last time you played two up ?

You seem to be confusing speculation with hedging.

If you want to be technical, he should in fact take out a forward contract which is very similar to a futures contract but means that all monies are exchanged at the end of the contract.

 

[Pornstar]

An option to lock in today's AUDUSD rate for $100,000 until August would set you back $2100.