A call option refers to a call option or a put option in which the customer buys the corresponding face value, maturity and strike price after paying a certain amount of option premium to the bank based on his judgment of the future direction of change.
When the option expires, if the change is favorable to the customer, the customer can obtain higher income by exercising the option.
The customer may choose not to exercise the option if the exchange rate changes to the customer’s detriment.
A put option is an option sold to the bank at the customer’s discretion while making a time deposit. The customer receives an option premium in addition to the interest on the time deposit (net of interest tax).
When the option expires, if the exchange rate changes unfavorably to the bank, the bank will not exercise the option, and the customer may get a higher interest rate than the fixed deposit.
If the exchange rate changes to the Bank’s advantage, the bank exercises an option to convert the customer’s principal amount of time deposits into a corresponding peg at the agreed exchange rate.
