Foreign Exchange Options

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Introduction to FX Options, (One Day)

Foreign exchange options are widely used to hedge and trade risk in the FX market. This workshop introduces the basic instruments, their mechanics, risks and practical applications. The workshop contains case study material designed to explain the key aspects under discussion. Prior knowledge of FX options is not required.

The workshop will cover:

An introduction to FX options terminology, product mechanics, pricing & use
Vanilla foreign exchange options strategies
Inputs to pricing & the "Greeks"
Exotic FX options, what they are & how they are used

Training will be in a workshop format. This will include a mixture of presentation and case study material. The course is designed for up to ten staff.

Below is a summary of the workshop content. The content of each day has been placed in a logical sequence and addresses the key topics.

Morning

Introduction

Spot
Forwards
FX swaps
Forward hedging techniques

Option Terminology

Call/put
Pay off profiles
ITM/OTM spot, forward
Premium
Exercise
Expiry
European style

Hedging with Vanilla Foreign Exchange Options

Using calls & puts
Advantages & disadvantages

Using Combinations of Vanilla Foreign Exchange Options

"Low cost" & "zero cost" structures
Risk reversals
Participating forwards
Seagulls
Advantages & disadvantages

Option Pricing

Intrinsic & time value
Inputs to pricing
Time
Implied volatility
Smiles & skews
Strike
Forward price

Afternoon

The Greeks

Delta
Gamma
Vega
Theta
What they are & practical use

Exotic FX Options

Premium reduction
Hedging & trading use
Practical applications

Non Barriers FX Options

Average rate & average strike options
Compound options
Basket options
Quanto options

Barrier Options FX Options

Knock-outs
Knock-ins

Binary FX Options

One touch
Contingent premium options

End of workshop & review

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