“, also known as option, refers to the contract buyer in the future agreed date or pay a certain option fee to the seller within a certain period of time, in order to buy and sell a certain amount of assets option.
In contrast to stock options, index options and other options, foreign exchange options are traded in foreign exchange.
The buyer of the spot right obtains the right after paying the corresponding option premium to the seller of the option.
That is, after paying a certain amount of option premium, the option buyer has the right to buy and sell the agreed currency on the agreed expiration date according to the exchange rate and amount agreed upon by both parties in advance. At the same time, the option buyer also has the right not to perform the above sale contract.
For example, if a company trades a “three-month” currency option with a bank at an option premium, and the agreed exchange rate is 1=1.2, the company can convert its money into dollars at that price when the option expires.
If 1 euro is more than $1.2 after maturity, the company cannot execute;
If 1 euro is less than $1.20 after maturity, the company may choose to enforce and demand this price.