Plain vanilla options for private individuals
Foreign exchange options can be of two types: by buying a call option, we acquire the right to buy, by selling it, we assume a commitment to sell. By buying a put option, we acquire the right to sell, and by selling it, we assume a buying obligation.
Its buyer acquires
the right (subject to payment of the option fee) to buy a predetermined amount
of currency
at a predetermined rate (strike rate) and expiration date.
In exchange for the option premium, the seller undertakes to sell a predetermined
amount of currency at the predetermined rate (strike price) when the option is
exercised.
Example transaction for selling a call option (right to buy)
- You expect the EUR/HUF exchange rate to be below a certain level (strike rate) in 6 months.
- Through the option premium (the consideration received for the selling of the option), you can earn extra income by choosing a strike rate at which the option is not exercised or at which you would have originally intended to sell the euro against forints.
- In exchange for the option premium, you take the risk that if the market EUR/HUF exchange rate at maturity is above the strike price, you will have to sell the amount of euro specified in the option at the strike price.
- The option premium will be credited to you on the second business day after the trade is made.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Strike | 340.00 |
| Volume-based option premium in fillér | 155 |
| Option premium expressed in HUF | HUF 775,000 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Strike340.00
- Volume-based option premium in fillér155
- Option premium expressed in HUFHUF 775,000
Example transaction for buying a call option (right to buy)
- You expect the EUR/HUF exchange rate to be above a certain level (strike price) in 6 months.
- By paying the option premium, you acquire the right to buy the amount of euros specified in the trade at the strike price when the option expires.
- You must pay the option premium on the second business day after the trade is made.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Strike | 335.00 |
| Volume-based option premium in fillér | 320 |
| Option premium expressed in HUF | HUF 1,600,000 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Strike335.00
- Volume-based option premium in fillér320
- Option premium expressed in HUFHUF 1,600,000
Its buyer acquires the right (subject to payment of the option fee) to sell a predetermined amount of currency at a predetermined rate (strike rate) and expiration date.
In exchange for the option premium, the seller undertakes to buy a predetermined
amount of currency at the predetermined rate (strike price) when the option is
exercised.
Example transaction for selling a put option (right to sell)
- You expect the EUR/HUF exchange rate to be above a certain level (strike rate) in 6 months.
- Through the option premium, you can earn extra income by choosing a strike rate at which the option is not exercised or at which you would have originally intended to buy the euro against forints.
- In exchange for the option premium, you take the risk that if the market EUR/HUF exchange rate at maturity is below the strike price, you will have to buy the amount of euro specified in the option at the strike price.
- The option premium will be credited to you on the second business day after the trade is made.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Strike | 322.00 |
| Volume-based option premium in fillér | 110 |
| Option premium expressed in HUF | HUF 550,000 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Strike322.00
- Volume-based option premium in fillér110
- Option premium expressed in HUFHUF 550,000
Example transaction for buying a call option (right to sell)
- You expect the EUR/HUF exchange rate to be below a certain level (strike price) in 6 months.
- By paying the option premium, you acquire the right to sell the amount of euros specified in the trade at the strike price when the option expires.
- You must pay the option premium on the second business day after the trade is made.
| Transaction parameters | |
|---|---|
| Duration | 6 months |
| Currency pair | EUR/HUF |
| Amount | EUR 500,000 |
| Spot rate EUR/HUF at the time of pricing | 329.00 (Reuters: EURHUF=D3) |
| Strike | 325.00 |
| Volume-based option premium in fillér | 200 |
| Option premium expressed in HUF | HUF 1,000,000 |
- Transaction parametersTransaction parameters
- Duration6 months
- Currency pairEUR/HUF
- AmountEUR 500,000
- Spot rate EUR/HUF at the time of pricing329.00 (Reuters: EURHUF=D3)
- Strike325.00
- Volume-based option premium in fillér200
- Option premium expressed in HUFHUF 1,000,000
Benefits
For purchased options
- You can benefit from a positive shift, so you can earn extra returns by taking risks on the foreign exchange rate.
- You can reduce or completely eliminate the exchange rate risk arising from your currency exposure in a personalised and structured way.
- The loss from a purchased option cannot be greater than the amount of the premium paid for the option.
- The option can be closed with a reverse trade before expiry.
- No deposit required.
For written options
- The option premium will be credited on the second day after the conclusion of the trade.
- The client can earn extra income through the option premium by choosing a strike price at which the option will not be exercised or at which the client would have traded as originally intended.
- The option can be closed with a reverse trade before expiry.
Risks
For purchased options
- The option premium amount is an instant cost.
- In the event of a positive move, it tends to have a higher cost compared to forwards, as the option is a complex financial product.
For written options
- The maximum amount of profit on the written option is the amount of the option premium, while the loss can be unlimited.
- The cost of closing an option depends on specific market conditions, which may exceed the cost of closing forwards with the same nominal value.
- It is a complex product, so the identification of risks requires greater
preparedness on the part of clients (a thorough knowledge of the product
information is required to fully understand the risks).
Experts
If you would like to become a client of OTP Global Markets, feel free to
contact us.
Zsigmond Csillag
Head of Department
Frigyes Soós
Sales
Budapest
Balázs Péntek
Sales
North Transdanubia region and Budapest
Botond Varga
Sales
South Transdanubia region and Budapest
Tamás Szabó
Sales
Northeast region and Budapest
Csaba Szemán
Deputy Head of Department
Southern Great Plain region and Budapest
Krisztián Tóth
Sales
Budapest
Ottó Izbéki
Sales
Equity Specialist
Sándor Andrási
Sales
Equity Specialist
Bálint Torda
Sales
Equity Specialist
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Information on the suspension of the market making obligation (available only in Hungarian)
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