Hedging your risks with a currency option
You can take out a currency option if you want to be sure of a minimum exchange rate in the future. Or if you have issued a quotation in a foreign currency.
A currency option gives you the right to exchange a foreign currency at a certain rate. If the exchange rate at the point of payment has turned strongly to your advantage, then you do not need to use the option. So a currency option hedges your risk, but you still benefit if the exchange rate turns out favourably. You pay a premium for this right.
- Confidence on the exchange rate.
- You are insured against negative FX-rate fluctuations.
- You still benefit from favourable price developments
- You pay a premium.