Join Mailing List

For latest news and information about Treasury and Financial Markets, enter your details below:

Foreign Exchange Options

Print Preview Send to a Friend Share

Introduction to FX Options, (One Day)

Enquire or book this course

Foreign exchange options are widely used to hedge and trade risk in the FX market. But often sales staff find talking to clients about options is not easy. This is particularly the case if they are used to doing spot, forward and swap transactions. There is always the worry that the customer knows more. This workshop introduces foreign exchange options, this includes the terminology, how puts and calls work, what influences option prices and the risks and practical applications of FX options. The objective is to get sales talking. 

The workshop contains case study material which can include examples of transactions undertaken by the bank with clients. Prior knowledge of FX options is not required.

The workshop will cover:

  • A review of FX risk and hedging
  • An introduction to FX options terminology
  • How options work and what influences their price
  • Simple foreign exchange options strategies, the advantages and disadvantages
  • Combining calls and puts to produce different risk profiles, the advantages and disadvantages
  • Exotic FX options, what they are & how they can be 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.



  • Market Background
  • Traditional hedging techniques
  • Common perceptions
  • Hedging policy
  • Talking with customers
  • Alternatives

Option terminology and use

  • Call/put
  • Pay off profiles
  • Intrinsic & time value
  • ITM/OTM spot, forward
  • Premium
  • Exercise
  • Expiry
  • European style
  • Application of simple option strategies
  • Buying calls and selling puts
  • Advantages & disadvantages

Combination strategies

  • Combining options – buying one option and selling another
  • No free lunch – just altering the risk profiles
  • Examples and case studies
  • FX cylinders/risk reversals
  • Variations with a third option
  • Participating forwards

What influences option prices

  • Inputs to pricing
  • Strike
  • Forward rate
  • Time
  • Implied volatility
  • Smiles & skews


Option Deltas

  • Delta hedging – what it is

Exotic FX Options

  • Premium reduction

Barrier FX Options

  • Knock-outs
  • Knock-ins
  • Barriers
  • Cylinder and barrier
  • Casestudy

Compound Options

  • What they are
  • The risk in contract tenders
  • Using compound options
  • Casestudy

Average Rate Options

  • What they are
  • Lowering premium costs
  • Casestudy

Brief explanation of:

  • Digital options
  • Basket options
  • Contingent premium options


End of workshop & review

Related Documents

Free to ViewShort courses>Foreign exchange options 100% relevant

Free to ViewMoney Markets & Foreign Exchange 58% relevant

Registration RequiredMarket Guides > Spot & forward foreign exchange 58% relevant

12th October 2009

Introduction Foreign exchange is defined as "a claim to a foreign currency payable abroad and may be funds held, bills or cheques". A foreign exchange transaction is, "a contract agreed today between two parties to trade an agreed amount of one currency for an agreed amount of another currency on a future date". When you travel you may be familiar with buying currency at the airport. Because the sums involved are small and paper money is exchanged the differences between buying and selling prices can be wide. You may also be unfortunate enough to pay a dealing fee. Banks, corporates and speculators deal in the professional market. Trades are transacted across electronic platforms and each trade can run into millions of dollars. As a consequence dealing spreads are very narrow and the money is exchanged by credits and debits to bank accounts. Let's find out about the spot and forward markets and the risks involved.

Free to ViewShort courses>Foreign exchange & Non deliverable forwards 58% relevant

Registration Requiredelearning > Spot & forward foreign exchange 58% relevant

Learn about the following: How the spot market works. What the spot price is. What happens when you do a deal. How the forward rate is calculated. How dealers make money. Why customers are important.

Registration Requiredelearning > Foreign exchange swaps 58% relevant

Learn the following: How foreign exchange swaps work. The calculations involved. What foreign exchange swaps can be used for.